Under the Fair Labor Standards Act (“FLSA”), employers are required to pay nonexempt employees a minimum wage for all hours worked including overtime pay of at least 1.5 times the employee’s regular rate of pay. One category of employees exempt from this requirement is that of executive, administrative, or professional (“EAP”) employees. The test for who qualifies as an EAP employee generally includes two prongs: (1) whether the employee performs executive, administrative, or professional duties as defined in the regulations promulgated by the Department of Labor (“DOL”), and (2) whether the employee is paid a salary or fee exceeding the minimum salary level designated by the DOL.

State of Texas v. U.S. Department of Labor 

On November 15, 2024, the United Stated District Court for the Eastern District of Texas struck down the Department of Labor’s 2024 Rule which increased this minimum salary level from $684 per week ($35,568 annually) to $844 per week ($43,888 annually) on July 1, 2024. The 2024 EAP Rule would have increased the minimum salary requirement again to $1,128 per week ($58,656 annually) on January 1, 2025. The Court did not limit its ruling to the plaintiffs in the case, the State of Texas and numerous businesses and business organizations, but rather invalidated the rule on a nationwide basis finding that the rule fell outside the scope of authority delegated to the DOL by Congress under FLSA.

The Federal Court’s opinion comes nearly five months after the Supreme Court’s landmark opinion in Loper Bright Enters. V. Raimondo, 144 S.Ct. 2444, 2273 (2024), striking down the longstanding doctrine of Chevron deference, under which courts would defer to executive branch agencies’ rules interpreting ambiguous legislation so long as the interpretation was “reasonable.” Instead, exercising its independent discretion, the Court found that DOL’s 2024 Rule exceeded the statutory grant of authority under FLSA and had to be set aside on a nationwide basis under 5 U.S.C. § 706(2)(A) & (C). The Court ruled that the statutory language in FLSA’s definition of an EAP employee, “any employee employed in a bona fide executive, administrative, or professional capacity,” focuses on an employee’s functions and duties rather than wages. 29 U.S.C. § 213(a)(1). While FLSA provides an explicit grant of authority to the DOL to “define and delimit” the boundaries of who qualifies as an EAP employee, id., the Court reasoned that the 2024 Rule’s increased minimum salary requirement replaced these terms entirely rather than setting reasonable boundaries for them.

What does this mean for your business? 

Even though the federal minimum salary requirement for EAP employees increased from $684 per week ($35,568 annually) to $844 per week ($43,888 annually) on July 1, 2024, it has now reverted nationwide back to $684 per week ($35,568 annually). As it stands, the planned increase to $1,128 per week ($58,656 annually) on January 1, 2025, will not take effect.

However, the DOL may appeal the decision; and the appeal could be decided before the incoming Trump administration takes office. Further, it is uncertain what position the Trump DOL might take with respect to the 2024 Rule and any pending appeal regarding the Texas Court’s opinion. Employers should consider numerous factors when deciding how to handle employees’ exempt salaries or nonexempt hourly wages in the wake of the Texas Court’s nationwide decision and the uncertain landscape ahead. Tuggle Duggins will continue to monitor the litigation and the DOL’s response and will issue further guidance to its clients as the DOL’s FLSA regulations evolve. Our employment law team can assist your business in navigating these processes and answer any questions you may have related to these developments.

For more information, please contact Ross Hamilton at RHamilton@tuggleduggins.com or 336-271-5279 or Jeff Sanches at JSanches@tuggleduggins.com or 336-271-5245.

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