Court Vacates New Overtime Rule in Major Win for NAHB
In a major win for NAHB members on Friday, the Eastern District of Texas issued a nationwide injunction in a coalition lawsuit NAHB filed challenging the Department of Labor’s 2024 Overtime Rule. As a result of the ruling, the salary level for determining overtime pay eligibility for salaried employees — categorized as executive, administrative or professional workers — has been lowered to the pre-2024 level of $35,568.
“This is a huge win for NAHB, home builders and remodelers, and associated subcontractors,” said NAHB Chairman Carl Harris. “The ruling means that bureaucrats in Washington cannot arbitrarily mandate salary levels when regulating how employees are paid and must abide by established labor laws.”
In late 2023, the DOL proposed a rule that would increase the current salary level for determining overtime pay requirements for executive, administrative, professional, outside sales and computer employees from $684 a week ($35,568 annualized) to $1,059 a week ($55,068 annualized) — a nearly 55% increase.
The court noted that the Fair Labor Standards Act (FLSA), which allows DOL to define and delimit which employees are exempt from overtime pay requirements, focused on the duties an employee performs rather than their wages to determine whether they should be exempt from overtime pay. Although the court acknowledged that DOL has authority to include a salary threshold component in determining whether an employee is exempt, the court held that the salary threshold must be a reasonable proxy for the duties test.
The court held that “because the 2024 Rule’s changes make salary predominate over duties for millions of employees, the changes exceed [DOL’s] authority to define and delimit the relevant terms.” The court further noted: “When a third of otherwise exempt employees who the [DOL] acknowledges meet the duties test are nonetheless rendered nonexempt because of an atextual proxy characteristic — the increased salary level — something has gone seriously awry.”
The court also held that the FLSA requires DOL to define and delimit the exemption through the formal notice-and-comment rulemaking process, which means that the 2024 Rule’s automatic updating feature is unlawful and exceeds DOL’s statutory authority.
As explained by the court, the DOL “endorses the Automatic Indexing Mechanism based on its conclusions that (1) it hasn’t done a bang-up job administering the EAP Exemption over the years; (2) its sporadic regulation has been driven by the difficulty of its task; so (3) the best way forward is to abdicate from more frequent and thorough rulemaking efforts by placing the regulation of the EAP Exemption on autopilot through the Automatic Indexing Mechanism. While this may be a satisfying solution for [DOL], it is unlawful under the [Administrative Procedures Act]. As it turns out, the APA’s notice-and-comment provisions must be followed even when an agency finds them inconvenient.”
The court relied on the Supreme Court’s recent decision in Loper Bright Enterprises v. Raimondo, which overturned the long-held Chevron deference, to guide its interpretation of FLSA. It also utilized the APA to vacate the rule nationally and remand it to DOL for further consideration in light of the opinion.
NAHB remained active throughout the rulemaking process and submitted comments when DOL issued the proposed rule, citing the negative impact such a significant increase would have on housing affordability, among other concerns.
Latest from NAHBNow
Apr 17, 2025
Housing Starts Decline Amid Economic UncertaintyOverall housing starts decreased 11.4% in March to a seasonally adjusted annual rate of 1.32 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
Apr 16, 2025
Unlock Exclusive Savings on Intuit QuickBooks and Enterprise SuiteNAHB has officially launched a new Member Savings program with Baytek, a premier Intuit QuickBooks and Intuit Enterprise Suite (IES) provider, giving members access to unadvertised savings, exclusive rebates, and powerful business solutions.
Latest Economic News
Apr 17, 2025
Housing Starts Decline Amid Economic UncertaintyConstrained housing affordability conditions due to elevated interest rates, rising construction costs and labor shortages led to a reduction in housing production in March.
Apr 16, 2025
Builder Confidence Levels Indicate Slow Start for Spring Housing SeasonGrowing economic uncertainty stemming from tariff concerns and elevated building material costs kept builder sentiment in negative territory in April, despite a modest bump in confidence likely due to a slight retreat in mortgage interest rates in recent weeks.
Apr 14, 2025
Where Do Builders and Remodelers Buy Building Products?The most common sources for products used in home building and remodeling are specialty retailers, lumber yards, and wholesale distributors, according to two recent NAHB surveys. The surveys include one of single-family homebuilders in the October 2024 NAHB/Wells Fargo Housing Market Index (HMI) and one of remodelers in the Q3 2024 NAHB/Westlake Royal Remodeling Market Index (RMI). Both surveys asked respondents where they purchase building products, regardless of who ultimately purchases them (themselves or subcontractors).