The July 1st start date for the new Fair Labor Standard Act’s (FLSA) salary test hinges on oral arguments slated to be heard in federal court on June 24th. The new FLSA overtime rule would raise the exempt salary threshold on July 1, 2024, and again on January 1, 2025.
The oral arguments stem from two lawsuits, one filed by a coalition of business groups on May 21, 2024, and the other by the Texas Attorney General on June 3rd. Both challenge the U.S. DOL’s final rule issued in April. The rule raises the minimum annual salary required to be exempt from the FLSA’s overtime requirements from $35,568 to $43,888 on July 1st and to $58,656 on January 1, 2025. The threshold would then increase automatically every three years beginning on July 1, 2027.
The two lawsuits have been consolidated into one case. They argue that the increase in salary thresholds impermissibly shifts the focus from the job duties test to salary level when determining if a position is exempt. The suits also argue that the 2024 rule is similar to a 2016 rule issued under the Obama Administration.
Notably, the 2016 challenge was filed by the same business group in the same Texas court as the current challenge. In the 2016 case, the Texas court ruled the DOL's attempt to automatically increase the salary threshold on a triennial basis was unlawful and permanently invalidated the rule.
Given that the new rule comes into effect in just a few short weeks, employers should monitor the pending challenges. We will advise clients immediately on any developments with the rule.
Federal Trade Commission’s Rule on Non-Competes Faces Similar Court Challenge
Another federal district court in Texas will be deciding whether to temporarily block the Federal Trade Commission’s proposed final rule poised to ban nearly all non-compete agreements beginning September 4, 2024.
The federal district court in the Northern District of Texas promised a decision by July 3, 2024 on whether to temporarily suspend the rule while the merits of the case are being adjudicated.
The April 23rd FTC final rule bans all non-compete clauses applying to current or former employees or independent contractors on September 4th. There are a few narrow exceptions to the ban:
· Non-competes entered into with senior executives prior to September 4th would remain valid. “Senior executives” are defined under the rule as workers who are in a “policy making position” and earn at least $151,164 annually.
· Non-competes in connection with the bona fide sale of a business entity, a sale of the business’ assets, or the sale of a person’s ownership interest in the business are also exempt from the ban.
· The ban would also not apply “where a cause of action related to a non-compete accrued prior to the effective date” of the rule.
We will advise our clients of the release of the court’s FTC ruling expected July 3rd.
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