Dive Brief:
- The State of Texas will not need to abide by the U.S. Department of Labor’s new overtime rule — which changes the threshold at which workers qualify for overtime from an annual salary of $35,568 to $43,888 beginning Monday — following a preliminary injunction request granted Friday by U.S. District Court Judge Sean Jordan.
- Texas filed its lawsuit June 3, arguing that in raising the salary bar, the department exceeded its authority by classifying executive, administrative and professional employees — so-called “EAP” employees — as nonexempt based on their salary, not their bona fide job duties (State of Texas v. U.S. Department of Labor, et. al.). The judge agreed that the rule is likely unlawful.
- In his decision, Jordan invoked Loper Bright Enterprises v. Raimondo, the Supreme Court’s decision to overturn the Chevron doctrine, which came down earlier the very same day.
Dive Insight:
“In the analysis that follows, the Court carefully follows Loper Bright’s controlling guidance and the APA [Administrative Procedure Act],” Jordan wrote in the decision — potentially the earliest in what is likely to be a slew of judicial action based on Friday’s landmark Supreme Court decision.
Relying on the Administrative Procedure Act, Texas referred to DOL’s 2024 changes to the EAP exemption as “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”
In its passage of the Fair Labor Standards Act, Congress exempted EAP employees but did not define those terms, Jordan noted. “An examination of the ordinary meaning of the EAP Exemption’s undefined terms shows that the Exemption turns on an employee’s functions and duties, requiring only that they fit one of the three listed, i.e., ‘executive,’ ‘administrative,’ or ‘professional capacity,’” Jordan wrote. “The exemption does not turn on compensation.”
Many lawsuits challenging regulatory interpretations this spring have relied on the APA’s “arbitrary and capricious” argument. Among the plaintiffs are 18 red states that sued the U.S. Equal Employment Opportunity Commission in late April over its new harassment guidelines and a group of insurance industry affiliates seeking to stop DOL’s update to the definition of an investment advice fiduciary under the Employee Retirement Income Security Act.
Business groups led by the U.S. Chamber of Commerce also used the claim when they challenged the National Labor Relations Board’s joint employer rule — a case the groups similarly won in a Friday decision issued the Monday before the rule was slated to take effect.
Although the State of Texas sought a nationwide injunction, Jordan limited the scope of his decision to the plaintiff alone. “Here, the only party before the Court is the State of Texas, in its capacity as an employer, suing to prevent the 2024 Rule from going into effect,” Jordan wrote. “Texas has put on evidence of its own injuries as an employer, but has not otherwise offered any evidence of injuries to other entities or individuals.”
However, the same judge presides over a challenge to the rule several business groups filed in May. “This decision may foreshadow a similar result in that case, as well as in a case pending in the Fifth Circuit that challenges the DOL’s authority to issue any salary requirement,” attorneys from Jackson Lewis noted in a Friday blog post.
For now, the overtime rule takes effect Monday for all covered employers other than the State of Texas.
