On Friday, June 24, 2024, the business day before the Biden Department of Labor’s new overtime rule was scheduled to take effect, a federal district judge granted the State of Texas’s request for a preliminary injunction to delay the rule’s effective date, concluding that the rule was “likely to be unlawful.” The decision is notable—in State of Texas v. U.S. Department of LaborNo. 4:24-CV-499-SDJ (ED Tex.) – comes from the same division of the same federal district court that in 2016 invalidated the Obama administration's new overtime rule. Unlike that 2016 decision, however, Friday's injunction does not have national reach – it is limited to the state of Texas as an employer.

In examining the state’s prospects of success in challenging the rule, the court referred to the Supreme Court’s decision in Loper Bright takes on Raimondowhich was decided earlier that day, Chevron USA Inc. v. Natural Resources Defense Council, Inc.. and stated: “[c]Our staff must use their independent judgment to determine whether an agency has acted within its legal authority.”

The Overtime Rule of 2024 (the “2024 Rule”) would have, among other things, increased the minimum salary for the executive, administrative, or professional employee (“EAP”) exemption from $684 per week ($35,568 annually) to $844 per week ($43,888 annually) effective July 1, 2024, and to $1,128 per week ($58,656 annually) effective January 1, 2025. The question for the court was whether the text of the EAP exemptions—codified in the FLSA regulations at 29 CFR part 541 and allowing the Secretary of Labor to “define” and “delineate” the terms “executive,” “administrative,” and “professional” employee—authorized the Secretary to increase the minimum salary to that extent. The court found that “[t]The clear meaning of these terms makes it clear that the proper investigation of whether someone is working in a managerial, administrative or professional capacity must be based on the function and duties of that person” – and not their compensation. Therefore, “any rule implementing the EAP waiver – including the 2024 Rule – must also focus on duties.”

The court concluded that “Texas is likely to succeed in its contention that the minimum wage changes made by the 2024 rule run counter to the plain language of the EAP exemption and that the 2024 rule therefore impermissibly exceeds the Department's authority to define and delineate the EAP exemption.” Citing its decision to invalidate the 2016 overtime rule—and including a welcome reference to Yogi Berra—the court found that the magnitude of the exemption's minimum wage increases effectively robs the duty test of its meaning:

As the New York Yankees' (undeniably) best catcher is reported to have said, this is “déjà vu all over again.” … In its 2024 rule, the Department again attempts to make sweeping changes to the EAP exemption's regulatory framework that, on its face, are designed to replace the FLSA's duty test with a predominant, if not exclusive, salary level test…. Thus, when the 2024 rule takes effect, the Department will [of Labor] expects that one million workers exempt from the working time regulation will wake up on 1 July as non-exempt workers –ie., will be entitled to overtime pay…. On January 1, the same will happen to another three million workers…. Then, on July 1, 2027, and every three years thereafter, millions more workers will have their status changed. Nothing will have changed in the jobs of these workers…. Rather, the only changes determining their status and exempting them from the exemption will be increases in the minimum salary in the Acting Minister's definition and delimitation of the EAP exemption.

As to the geographic limits of the injunction, the Court recognized that the law neither requires nor prohibits a nationwide remedy; that the only party seeking relief here is the State of Texas; that Texas has presented evidence of its own injuries as an employer but has otherwise presented no evidence of injuries to other businesses or individuals; and that, therefore, under the circumstances, a preliminary injunction focused on Texas is consistent with the procedural nature of the case and the record before the court. Thus, if a nationwide 2024 Rule injunction is to be issued, it will be in another litigation. Such litigation seeking a nationwide injunction is Flint Avenue LLC v. U.S. Department of LaborNo. 5:24-CV-130-C (ND Tex.). We are monitoring developments in this case, where the hearing on plaintiff's motion for a preliminary injunction appears to have concluded.