DOL’s 2024 Final Rules of Overtime Blocked Nationwide

Guest Blog Authors: Dana Fruzynski, Attorney, Cheshire Law Group, and Diane J. Stoeberl, Attorney, Cheshire Law Group | Learn More about Cheshire Law Group and their affiliate site, PAnonprofitlaw.com | Connect with Cheshire Law Group on LinkedIn

The U.S. Department of Labor adopted new rules that started taking effect on July 1, 2024 that were intended to expand overtime pay for millions of lower-wage workers nationwide. On November 15, 2024, a federal district judge in Texas (Judge Sean Jordan, appointed by Trump in his first term) struck those down, calling into question whether the rules will actually go into effect. The Department of Labor under Biden’s administration may appeal that decision, but it is unclear if any such appeal and refining this rule and increasing overtime eligibility will be a priority of the incoming administration. More likely, we’re going back – to the rules in effect prior to July 1, 2024.

The DOL’s Rules – Old & New

Under federal overtime rules, employers generally must pay overtime to employees whose compensation is less than a minimum level – and with very few, limited exceptions these rules generally apply to all nonprofits.

Prior to July 1, 2024, that minimum level for determining eligibility for overtime was $35,568 ($684/week) (i.e., employees paid less than this amount were generally eligible for overtime pay). Under the DOL’s new rules, this minimum level increased on July 1, 2024, to $43,888 ($844/week), and that minimum threshold was set to increase again on January 1, 2025, to

$58,656 ($1,128/week) – meaning that a higher number of lower-wage workers would be eligible for overtime pay. To this same effect, the DOL’s new rules also raised the thresholds for highly compensated workers – i.e., for those in the workforce who are generally not eligible for overtime pay because they are paid higher salaries that exceed certain thresholds (prior to July 1, 2024, before the DOL’s new rules, that threshold was at $107,432 of total compensation per year; under the DOL’s new rules, that threshold increased on July 1, 2024 to $132,964 of total compensation per year, and was set to increase again on January 1, 2025, to $151,164 of total compensation per year).

Litigants Challenge & Judge Strikes Down DOL’s New Rules

Immediately after they were issued, the DOL’s new rules were challenged in several federal courts across the country, but they went into effect in all states, except in Texas, where Judge Jordan had granted an injunction at the request of the State of Texas, various trade groups, and employers who had challenged the rules, arguing that the rules unlawfully prioritized salary levels over job duties, undermining the true intent of the Federal Labor Standards Act.

In his ruling on November 15, Judge Jordan rejected the thresholds that impact overtime pay eligibility and also invalidated the mechanism established by the DOL that would have automatically increased these thresholds every three years based on inflation and other economic indicators.

What’s Next?

The Department of Labor may appeal the decision to the Fifth Circuit or may start from scratch and attempt to implement a new rule based on the Court’s decision, though it is unclear with the incoming administration where this will head.

In 2017, using reasoning that Judge Jordan followed, a federal district judge similarly blocked an Obama-administration rule that would have raised the salary threshold from $23,660 to about $47,000, but the first-term Trump administration revised the regulation in 2019, raising the bar from $23,660 to the present-day $35,568; it remains to be seen if history will repeat itself.

Meanwhile the current Texas ruling preserves the previous salary threshold of $35,568 per year for employees who meet the Administrative, Executive, or Professional Duties Tests and preserves the Highly Compensated Employee Exemption at $107,432 per year.

But Wait! Doesn’t Pennsylvania Have its Own Overtime Rules?

Nope, not anymore. Those rules were repealed in 2021.

• There was a salary threshold in Pennsylvania ($875/week or $45,500/annually), but that was a prior Pennsylvania rule that was repealed by the Pennsylvania legislature in
• Prior to the repeal, the rule provided a minimum salary threshold for a Pennsylvania employee to meet the executive/administrative/professional exemption (the employee also had to meet the duties test of the exemption as well). This threshold was higher than the federal minimum salary threshold.

• As part of the repeal in 2021, Pennsylvania eliminated completely its own definitions of the executive/administrative/professional exemptions.

• In the absence of Pennsylvania rules that expand the federal rules, the federal rules

What Should Our Nonprofit Do?

The decision came at a difficult time, about six weeks before the second increase was to take effect, as we’re headed into the holiday season – such that Fox News in Michigan reported this news as ‘a lump of coal for US employees.’ For many organizations, it may come as a relief financially, as some see the DOL’s rules as too much and too sudden of an increase; for others, the increase may feel overdue – and equitable – helping to set more fair standards and providing certainty.

If your organization raised salary levels to meet the July 1, 2024 minimum, it may be not be prudent to now lower those salaries back to their pre-July 1st levels, as this could create a morale issue.

Your organization should also take the time now to ensure that employees are properly classified under the old law, as doing so still carries stiff penalties.

In addition to considering compliance with government regulations and the influence of market forces, it’s critical to consider your organization’s own facts and circumstances – as well as your nonprofit organization’s guiding values – as you determine next best steps.

Please note: This alert is a general overview and does not constitute legal advice.

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This guest blog post was authored by PANO Corporate Partner Cheshire Law Group. If you have specific questions or need a legal opinion about how to proceed, please contact a member of the Cheshire Law Group team. PANO and Cheshire Law Group will continue to monitor the situation and provide updates as they are released.