In a landmark decision on July 4, 2025, a federal court in Texas ruled to uphold protections for workers entitled to overtime pay, blocking the Department of Labor’s (DOL) proposed increase to the salary threshold for overtime exemptions. The court’s decision is a significant victory for labor advocates, signaling that the current rules regarding overtime pay will remain in place for the foreseeable future.
The Department of Labor’s Proposed Rule
In 2024, the Department of Labor proposed a rule that would increase the salary threshold for workers to qualify for overtime pay under the Fair Labor Standards Act (FLSA). Under the proposed rule, the DOL intended to raise the threshold to $55,000, a significant increase from the previous threshold of $35,568. This increase was part of a broader initiative to ensure that workers who regularly work over 40 hours per week would receive overtime compensation, regardless of their job duties or title.
The DOL’s proposal was part of an ongoing effort to address wage stagnation and ensure that more workers, particularly those in lower-wage and middle-wage industries, received fair compensation for the hours they worked. Labor advocates supported the increase, arguing that it would extend overtime protections to millions of workers who were previously excluded.
However, the rule faced strong opposition from business groups, including large employers, industry trade associations, and chambers of commerce. These groups argued that the proposed salary threshold was too high, especially for smaller businesses, and could lead to job losses or reduced work hours for salaried employees. In response to these concerns, the rule was delayed multiple times, and a series of legal challenges were filed.
The Court’s Ruling
On July 4, 2025, the U.S. District Court for the Northern District of Texas ruled that the DOL had overstepped its authority in proposing the rule. The court found that the DOL did not sufficiently justify the $55,000 threshold and failed to consider the economic impact on businesses, particularly small businesses. The ruling vacated the rule, maintaining the previous salary threshold of $35,568.
The court’s opinion emphasized that while the DOL has broad authority to set the salary threshold for overtime exemptions, the agency must balance this authority with consideration of economic factors and the potential effects on employers. The court also noted that Congress had not provided the DOL with specific guidelines on what constitutes an appropriate salary threshold, thus leaving the issue open to interpretation.
Reactions to the Ruling
Labor unions and employee advocacy groups were disappointed by the ruling, arguing that it would continue to leave millions of workers without the protections they deserve. They contend that the decision will exacerbate wage inequality, particularly for salaried workers who regularly work overtime but do not receive additional compensation. Labor groups have vowed to continue pushing for an increase in the salary threshold through legislative channels, including the introduction of bills in Congress.
On the other hand, business groups, including the National Federation of Independent Business (NFIB), celebrated the court’s decision. They argued that the proposed increase would have created a financial burden on small businesses, forcing them to reduce employee hours or increase wages to comply with the new rule. Many employers had feared that the increase in the salary threshold would lead to unintended consequences, such as limiting opportunities for salaried workers or shifting them to hourly wages.
What’s Next for Overtime Pay?
The ruling effectively blocks the DOL’s proposed increase to the salary threshold for overtime exemptions, but the issue may not be resolved for good. The DOL could appeal the decision, seeking to have the rule reinstated or further adjusted. Additionally, the issue of overtime pay remains a key topic in ongoing debates about wage fairness, income inequality, and workers’ rights.
In the meantime, employers must continue to follow the existing salary threshold of $35,568, which has been in effect since 2020. This threshold applies to workers who are classified as exempt from overtime pay based on their salary level and job duties. Employees who earn below this threshold are entitled to overtime pay for hours worked beyond 40 hours per week.
Looking Forward
The debate over overtime pay is likely to continue, with labor advocates pushing for increased protections for salaried workers and business groups seeking to limit the scope of overtime requirements. As the court’s decision stands, the DOL’s proposed changes are on hold, but this issue is far from settled. It remains to be seen whether Congress will take action to address the issue legislatively, or if the courts will continue to play a role in shaping overtime regulations in the future.
