Friday, a federal judge in Texas blocked the United States Department of Labor (DOL) from increasing the maximum salary threshold for so-called “white-collar” overtime under the Fair Labor Standards Act (FLSA), preventing the rule from going into effect nationwide.
As a result of this, the new minimum salary threshold in Maine will be $845.21 per week — or $43,951 annually — instead of the expected $58,656, according to the Maine Department of Labor (MDOL).
Under the FLSA, employers are generally required to pay employees overtime, or time-and-a-half, if they work more than forty hours in a week.
Some “white-collar” employees — including those who fall under the categories of executive, administrative, and professional — are exempt from this requirement, however, if they are also paid on a salaried basis and earn above a certain threshold.
It is this monetary threshold that was at the center of the recent legal controversies. Judge Sean Jordan’s 62-page ruling characterized the DOL’s recent rule increasing the qualifying salary threshold as being in excess of the department’s authority and therefore unlawful.
According to Judge Jordan, the rule “‘effectively eliminate[s]’ consideration of whether an employee performs ‘bona fide executive, administrative, or professional capacity’ duties in favor of what amounts to a salary-only test.”
Had these changes been permitted to take effect, it Jordan estimated that several million employees who are currently ineligible for overtime pay would suddenly become non-exempt “with no change in their duties.”
This is not the first time that changes made to this threshold by the DOL have been challenged in court.
In 2016, the department significantly raised this salary threshold and attempted to implement an indexing mechanism to continue increasing the amount automatically over time. The courts ultimately blocked this rule on grounds similar to those cited by Jordan, explaining that the change effectively prioritized an employee’s level of compensation over the duties they perform.
Although the rule promulgated by the department in 2019 moved away from many of these concerns, the 2024 rule at the heart of these most recent challenges largely represents a return to the controversial 2016 approach to delineating between exempt and non-exempt workers.
According to Jordan’s analysis, Congress deliberately constructed the FLSA so as to exempt employees from overtime pay on the basis of their duties, not the amount of money they make.
Consequently, the department does not have “unbounded” authority to define the meaning of “executive, administrative, and professional” employees in a way that effectively “replac[es]” the “original statutory terms” and “frequently yields different results than the characteristic Congress initially chose.”
Because the statutory language focuses on an employee’s duties, Jordan argues that the definitions developed by the DOL “cannot…replace or swallow the meaning those terms have.”
“When a third of otherwise exempt employees who the [DOL] acknowledges meet the duties test are nonetheless rendered nonexempt because of an atextual proxy characteristic—the increased salary level—something has gone seriously awry,” Jordan argued.
Jordan goes on to show that a significant share of employees who could receive overtime pay under the increased thresholds set by the 2024 would not otherwise be eligible for overtime compensation based on the duties they actually perform.
“For significant percentages of [employees], encompassing millions of workers, the 2024 Rule’s salary thresholds ‘effectively eliminate’ consideration of whether an employee performs ‘bona fide executive, administrative, or professional capacity’ duties in favor of what amounts to a salary-only test,” Jordan wrote.
As a result of Jordan’s Friday ruling, the July 2024 increase included in the rule will be nullified and the scheduled January 2025 increase will not take place. It also prevents the automatic indexing mechanism established by the department’s rule from being implemented in the future.
Click Here to Read the Full 62-Page Decision
In Maine, the salary threshold for overtime pay is set at 3,000 times the state’s minimum wage or the DOL standard, whichever is higher. Consequently, Maine’s threshold going into 2025 is higher than the amount now enforceable by the DOL.
Other states that have also implemented independent means of calculating a salary-level threshold for “white-collar” overtime pay include Alaska, California, Colorado, New York, and Washington.
The DOL may appeal the federal judge’s ruling to the Fifth Circuit, although given the upcoming leadership changes that will occur as the Trump Administration takes office in the coming months, it is currently unclear whether or not the department will ultimately decide to do so.
