The central theses

• Effective July 1, workers exempt from the Fair Labor Standards Act (FLSA) minimum wage and overtime protections under the bona fide Executive, Administrative, and Professional (EAP) exemption must receive at least $844 per week (equivalent to $43,888 per year).
• On January 1, 2025, this minimum salary limit will increase to $1,128 per week (equivalent to $58,656 per year).
• The duty checks for employees exempt from the EAP remain unchanged.

As previously reported, on April 23, the DOL issued a final rule updating and revising the regulations implementing the FLSA's EAP exemption. The final rule makes three key changes:

1. On July 1, the minimum salary threshold for EAP-exempt employees will increase from $684 per week (equivalent to $35,568 per year) to $844 per week (equivalent to $43,888 per year). In addition, the total annual compensation threshold for highly compensated employees will increase from $107,432 per year to $132,964 per year.
2. On January 1, 2025, there will be further increases: the minimum salary threshold for EAP-exempt employees will increase to $1,128 per week (equivalent to $58,656 per year) and the threshold for total annual compensation for highly paid employees will increase to $151,164.
3. Further increases in the minimum salary thresholds for both EAP-exempt and highly paid employees will occur on July 1, 2027, and every three years thereafter.

In the short time since its announcement, the DOL's final rule has faced a number of legal challenges. Some of those challenges culminated in a busy day of court rulings on Friday, June 28. Earlier in the day, the United States Supreme Court released its opinion in Loper Bright Enterprises et al. v. Raimondo, Secretary of Commerce, et al.by repealing the “Chevron Doctrine” that was adopted in 1984 in the case of Chevron USA, Inc. v. Natural Resources Defense Council, Inc. This Supreme Court ruling appears to have played a crucial role in the Eastern District of Texas’ decision State of Texas v. U.S. Department of Labor, et al. (Texas v. DOL), where it states: “In the following analysis, the Court carefully follows Loper Brights Controlling management and the [Administrative Procedure Act].”

In Texas v. DOLThe State of Texas (in its capacity as employer) sued the DOL, claiming that the agency exceeded its authority when it issued the final rule. Texas also sought a preliminary injunction to prevent the new rule from going into effect while the court determines whether or not the agency's actions were lawful. The court granted the preliminary injunction on June 28. In doing so, the court found that the State of Texas presented sufficient evidence to be likely to succeed in its claim that the DOL exceeded its authority when it issued the final rule and granted the State of Texas's request for a preliminary injunction.

However, the interim injunction is critical only prevents the implementation or enforcement of the final rule against the State of Texas in its capacity as employerThe interim injunction not Protecting private employers within Texas or any employer – public or private – outside the borders of the Lone Star State.

The other legal challenges to the DOL's final rule, two of which are pending in federal courts in Texas, have so far failed to prevent the rule from taking effect on July 1. The first challenge, Plano Chamber of Commerce et al. v. U.S. Department of Labor et al.was also filed in the Eastern District of Texas and filed in the Texas v. DOL case after the preliminary injunction was issued. This consolidation did not affect the scope of the preliminary injunction, and it continues to apply only to the State of Texas in its capacity as employer.

The second challenge to the validity of the DOL’s final rule is Flint Avenue LLC v. U.S. Department of Labor, et al.which was filed in the Northern District of Texas. Similar to the situation in the Texas v. DOL case, the Flint Avenue The plaintiff sought an injunction to prevent the new rule from coming into force while the court determined whether the agency's actions were lawful or not. Today, however, the Flint Avenue The court denied the motion for a preliminary injunction because the plaintiff failed to demonstrate that he would suffer irreparable harm as a result of the July 1 salary threshold increase. In addition, the court ruled that it had sufficient time to address the issues of the main claim before the increase takes effect on January 1, 2025.

While the court’s decision in Texas v. DOL bodes well for other lawsuits challenging the DOL's actions, as to date no other court has blocked the implementation or enforcement of the final rule.

What does all this mean for employers?

• If they have not already done so, employers should promptly review the salaries of their EAP-exempt employees to ensure they reflect the required changes. In doing so, employers should also review the duties of affected employees to ensure they qualify for the EAP exemption.
• Starting today, all employers (except the Texas state government) subject to FLSA requirements must increase the salaries of their EAP-exempt employees to at least $844 per week to maintain the exemption.
• In addition, all employers subject to FLSA requirements should prepare for a second mandatory increase on January 1, 2025, when the minimum salary threshold for EAP-exempt employees will increase to $1,128 per week.

What's on the horizon?

• A possible review by a higher court of the preliminary injunction issued by the Eastern District of Texas in favor of the State of Texas.
• A potential decision on whether the DOL's final rule exceeds the agency's authority, as alleged by the State of Texas and in other cases.

Companies have a number of options to ensure compliance with the DOL's final rule, including salary increases, employee reclassifications, and overtime reductions. BakerHostetler's labor and employment team is comprised of dozens of experienced individuals ready to assist and advise companies in adapting to the requirements of the DOL's final rule and complying with the ever-evolving regulatory landscape. If you have any questions about this alert, please feel free to contact one of our experienced professionals.

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