On July 14, 2025, the U.S. Court of Appeals for the Fifth Circuit issued a significant decision addressing the application of the Fair Labor Standards Act (FLSA) overtime exemption for highly compensated employees (HCEs) in the oilfield services sector. In Gilchrist v. Schlumberger Technology Company, the court reversed a district court ruling and held that two former employees of an oilfield services company, who worked as Measurements While Drilling Field Specialists (MWDs), were exempt from FLSA overtime requirements due to their level of compensation and their administrative and advisory duties.

Background

The plaintiffs, who served as MWDs, were responsible for providing real-time downhole data—such as drilling trajectory, pressure, and temperature—to clients engaged in oil and gas exploration. Their work was critical to ensuring safe and efficient drilling operations, as errors could result in significant operational and safety risks. The MWDs’ primary responsibilities included rigging up equipment, monitoring and quality checking drilling data, and communicating findings to the directional driller and, ultimately, the client.

Despite earning annual compensation well above the regulatory threshold for HCEs (over $200,000), the plaintiffs were not paid overtime. They brought suit, alleging they were not exempt from FLSA overtime provisions. The district court found in their favor, concluding that their duties did not qualify as exempt administrative or executive work.

Fifth Circuit’s Analysis

On appeal, the Fifth Circuit focused on whether the plaintiffs met the requirements for the HCE exemption under 29 U.S.C. § 213(a)(1) and 29 C.F.R. § 541.601(a). The parties agreed that the compensation and non-manual work requirements were satisfied; the dispute centered on whether the plaintiffs “customarily and regularly performed” at least one exempt administrative or executive duty.

The court held that the MWDs performed two qualifying administrative duties:

  1. Quality Control: The court found that the MWDs’ role in quality checking drilling data before it was provided to clients constituted administrative quality control work, as contemplated by the regulations. The MWDs were responsible for ensuring the accuracy and completeness of data logs, removing erroneous data, and preparing final reports for client review. This work was performed “customarily and regularly,” meeting the regulatory standard for frequency.
  2. Advisory and Consulting Functions: The court also determined that the MWDs acted as advisers to the company’s clients by providing essential real-time information and guidance during drilling operations. Drawing on recent Fifth Circuit precedent, the court concluded that such advisory work directly related to the management or general business operations of the employer’s customers, satisfying the administrative exemption criteria.

The Fifth Circuit rejected the district court’s reliance on prior, more restrictive interpretations of the administrative exemption and clarified that, under the HCE exemption, a “fair reading” of the regulations is required. The court also noted that the HCE exemption imposes a more flexible duties standard than the standalone administrative exemption, requiring only that the employee customarily and regularly perform one qualifying duty.

Because the plaintiffs’ administrative duties were sufficient to satisfy the HCE exemption, the court did not address arguments regarding executive duties or the exercise of discretion and independent judgment.

Practical Impact

This decision reinforces the applicability of the HCE exemption to oilfield service employees whose primary responsibilities include quality control and advisory functions, even where their direct client interaction may be limited. The ruling clarifies that high compensation, coupled with regular performance of qualifying administrative duties, is sufficient to exempt employees from FLSA overtime requirements under the HCE standard.

A copy of the Fifth Circuit’s opinion is available here.

On June 5, 2025, the U.S. Supreme Court issued a unanimous decision clarifying the evidentiary standard for Title VII disparate treatment claims.  The Court held that plaintiffs who are members of a majority group—such as heterosexuals, men, or whites—are not required to meet a heightened evidentiary burden to establish a prima facie case of discrimination.  This decision resolves a circuit split, reinforcing that Title VII’s protections apply equally to all individuals, regardless of group membership.

In that case, Marlean Ames, who identifies as a heterosexual woman, had been employed by the Ohio Department of Youth Services since 2004, holding various positions over the years. In 2019, she applied for a newly established management role within the agency’s Office of Quality and Improvement. Although she was interviewed for this position, the agency ultimately selected another candidate, a lesbian woman, for the job.  Shortly after her interview, Ames was removed from her position as program administrator by her supervisors. She accepted a demotion, returning to her previous secretarial role, which came with a significant reduction in pay. The agency subsequently filled the now-vacant program administrator position with a gay man.

Ames believed that her sexual orientation was the reason she was denied the promotion and later demoted. As a result, she filed a lawsuit against the Ohio Department of Youth Services, alleging that these employment decisions constituted discrimination under Title VII. The lower courts initially ruled against her, applying a heightened evidentiary standard because she was a member of a majority group.  Under that heightened evidentiary standard, the court required a member of a majority group to show “background circumstances to support the suspicion that the defendant is the unusual employer who discriminates against the majority.”

In an interesting concurring opinion, Justice Thomas signaled that, in an appropriate case, he would be willing to reconsider whether the long-standing McDonnell Douglas burden-shifting test remains a workable and useful evidentiary tool for trial courts evaluating disparate treatment employment discrimination claims.

This decision should have little impact on Texas employers because the Fifth Circuit Court of Appeals was not one of the circuits requiring members of a majority group to make a heightened showing that the defendant is the unusual employer who discriminates against the majority.

A copy of Ames v. Ohio Depart. of Youth Services is available here.

The case arose from a dispute involving an SMU professor who alleged she was denied tenure due to discrimination and retaliation. In addition to statutory discrimination and retaliation claims against the University, she brought common law claims for defamation and fraud against individual co-workers, based on statements and actions taken during the tenure review process. The district court dismissed the defamation and fraud claims against the employees, reasoning that the Texas Commission on Human Rights Act (TCHRA)
preempted such claims when they were based on the same conduct as the statutory discrimination claims.

The Fifth Circuit Court of Appeals certified the question to the Texas Supreme Court. In holding that employees were not shielded from common law tort claims based on the
TCHRA preemption provisions, the Court noted the following as significant:

  • The TCHRA is expressly limited to employer liability and does not create personal
    liability for individual employees.
  • The Act’s comprehensive remedial scheme precludes duplicative or alternative
    claims against employers, it does not extend that exclusivity to individual employees.
  • Longstanding Texas common law provides remedies for torts such as defamation
    and fraud, and nothing in the Act’s text or structure indicates a legislative intent to abrogate
    those remedies as to employees.

The practical effect of the decision is that employees accused of workplace misconduct—such as making allegedly defamatory statements or committing fraud—may face personal liability under common law, even if the same conduct is also the basis for a statutory discrimination or retaliation claim against the employer. In practice, this does not appear to come up often, the Court’s decision could encourage a greater number of these filings in the future.

A copy of the full opinion is available here.

Today, the U.S. Supreme Court unanimously held that “the preponderance-of-the-evidence standard applies when an employer seeks to prove that an employee is exempt from the minimum-wage and overtime-pay provisions of the Fair Labor Standards Act (FLSA).” The Court reversed the Fourth Circuit, which had affirmed the District Court’s use of the “clear-and-convincing-evidence standard” in favor of the employees, who sued their employer for failing to pay them overtime.  The Court explained that “the preponderance standard is the default in civil litigation,” and that the FLSA does not specify a different standard, nor does the Constitution or any other exceptional circumstance require one.  The Court rejected the employees’ policy arguments for a heightened standard and remanded the case for the lower courts to apply the correct standard to the facts.

This case will have little impact on FLSA cases litigated in the Fifth Circuit as the courts have generally applied a preponderance of the evidence standard in exemption cases.

A link to the entire opinion is here.

In an April 2024 final rule that abruptly took effect July 1, 2024, entitled Defining and Delimiting the Exceptions for Executive, Administrative, Professional, Outside sales, and Computer Employees, the Department of Labor amended the Fair Labor Standards Act to require a higher standard salary level for those employees exempt from the Act’s minimum wage and overtime protections (the “Final Rule”).[1] In doing so, the Department of Labor increased the minimum weekly salary threshold from $684 per week ($35,568/year) to $844 per week ($43,888/year), with additional increases in January of 2025 ($1,128/week or $58,656/year), July 1, 2027, and every three years thereafter.

Unsurprisingly, challenges to the Final Rule started rolling into federal courts across Texas. See Plano Chamber of Commerce, et al. v. U.S. Dep’t of Labor et al., No. 4:24-CV-00468-SDJ (E.D. Tex. 2024); see also State of Tex. v. U.S. Dep’t of Labor, et al., No. 4:24-CV-00499-SDJ (E.D. Tex. 2024); Flint Ave. LLC v. U.S. Dep’t of Labor, et al., 5:24-CV-00130-C. On June 28, 2024, Judge Sean Jordan of the Eastern District of Texas issued a limited injunction that partially blocked the Final Rule from going into effect and further consolidated the two cases before that court—Plano Chamber of Commerce and State of Texas. While the injunction was limited to the State of Texas as the employer, both Judge Jordan and Judge Cummings in the Northern District of Texas ordered expedited summary judgment briefing in their respective cases, thereby leading to the reasonable assumption that a merits-based decision on the enforceability of the Final Rule would be reached before the January 1, 2025 salary increase.

On November 15, 2024, the much-anticipated ruling was handed down in the Eastern District of Texas. In striking down the Final Rule, the Court held that “the Department [of Labor] exceeded the authority delegated by Congress” to “define and delimit the [FLSA’s executive, administrative, and professional exemption’s] relevant terms.” State of Tex. and Plano Chamber of Commerce, et al., No. 4:24-CV-00499-SDJ (Dkt. #76 at pp. 30, 39). The Court further noted that an “employee’s status [must] turn on duties—not salary[,]” and the Final Rule impermissibly “make[s] salary predominate over duties for millions of employees[.]” Id. at p. 39.

So what happens now? The Final Rule is set aside and vacated, and the January 1, 2025 salary increase (and any increase thereafter) will not go into effect.

[1] https://www.federalregister.gov/documents/2024/04/26/2024-08038/defining-and-delimiting-the-exemptions-for-executive-administrative-professional-outside-sales-and (last accessed November 15, 2024).

On April 19, 2024, the U.S. Equal Employment Opportunity Commission (“EEOC”) issued a final rule to implement the Pregnant Workers Fairness Act (“PWFA” or the “Rule”). The Rule was published and becomes effective on June 18, 2024.

The PWFA requires covered employers to provide reasonable accommodations to employees with known limitations, including physical or mental conditions, “related to, affected by, or arising out of pregnancy, childbirth, or related medical conditions” unless doing so poses an undue hardship. The PWFA also prohibits covered employers from discriminating against, retaliating against, and coercing employees with known limitations.

The EEOC provides guidance to employers about their obligations under the Rule, including a non-exhaustive list of examples of qualifying conditions. See § 1636.3(b). As explained above, the limitation must be related to, affected by, or arising out of pregnancy or childbirth.

“Pregnancy” and “childbirth” includes current or past pregnancy; potential or intended pregnancy (which can include infertility, fertility treatments, and the use of contraception); and labor and childbirth (including vaginal delivery and cesarean section). The PWFA provides that medical conditions related to pregnancy include but are not limited to:

  • Lactation (including breastfeeding and pumping);
  • Miscarriage;
  • Stillbirth;
  • Having or choosing not to have an abortion;
  • Preeclampsia;
  • Gestational diabetes; and
  • HELLP (hemolysis, elevated liver enzymes and low platelets) syndrome.

Related medical conditions may also include pre-existing conditions that were exacerbated by pregnancy or childbirth, such as diabetes or high blood pressure.

The Rule further provides specific examples of reasonable accommodations that are available to employees under the PWFA. These include but are not limited to frequent breaks, schedule changes, telework, and temporary suspension of one or more essential job functions.

The PWFA takes some guidance from the Americans with Disabilities Act (“ADA”). For example, like the ADA, the Rule provides for an interactive process between the employer and employee when necessary. The Rule also takes its definition for an employer’s “undue hardship” from the ADA, as well as the factors to be considered when determining if undue hardship exists. However, under the Rule, a known limitation does not have to qualify as a “disability” under the ADA.

Although the PWFA initially received bipartisan support, the EEOC’s inclusion of abortion within the definition of “pregnancy, childbirth, or related medical condition” has caused friction. Indeed, on April 25, 2024, 17 states led by Tennessee, including neighboring states Oklahoma and Arkansas, filed a complaint for injunctive and declaratory relief against the EEOC in the Eastern District of Arkansas related to the PWFA and the “abortion-accommodation mandate.” Tennessee v. E.E.O.C., Civ. A. No. 2:24-CV-84-DPM (E.D. Ark. 2024). Plaintiffs in that action assert that the Rule violates the Administrative Procedure Act and the U.S. Constitution because the Rule requires employers to accommodate workers’ abortions, even those that are illegal under state law.

Given the pending litigation, the future of the EEOC’s Rule and its interpretative guidance is uncertain. Of course, employers should consult with legal counsel and follow the status of the litigation challenging the Rule to determine what obligations they have to pregnant employees under the PWFA.

A copy of the final rule can be accessed here.

A copy of just the rule (and not the commentary) can accessed here.

On April 23, 2024, the Federal Trade Commission voted 3-2 to approve a final rule banning all employee noncompetition agreements nationwide.  The rule, currently set to go into effect 120 days after publication in the Federal Register (except for the notice provision which is effective earlier), is the result of the FTC’s position that these agreements are unfair methods of competition in violation of Section 5 of the FTC Act. Not only does the rule have an impact on an employer’s ability to enter into these agreements with future employees, though—it also affects existing noncompete agreements employers have with current and past employees.

Under the rule, employers must contact current (and past employees with last known contact information on file) who entered into noncompetition agreements prior to or during their employment and that are still in effect to inform these employees that the noncompetition agreements would not be enforced. The notification must be made within August 21, 2024.

The rule expressly applies to noncompetition agreements rather than other forms of restrictive covenants. In fact, the FTC states that well-drafted confidentiality, non-disclosure, and non-solicitation agreements may even work to achieve the same purpose as noncompetition agreements, without unfairly affecting competition. The FTC was also quick to add, however, that, under certain circumstances, non-solicitation clauses (and other employee agreements, such as employee repayment agreements or non-disclosure agreements) could qualify as noncompete clauses subject to the ban. While the FTC refused to categorically determine whether these other employee agreements fall under the rule, it did provide a factually intensive “functions to prevent” test. In essence, if an employee agreement not classified as a noncompetition agreement nevertheless “functions to prevent” competition with the employer following an employee’s separation from employment, it also falls within the scope of the rule.

The rule has exceptions for preexisting agreements with senior executives, agreements entered into in connection with the sale of a business, existing causes of action and where the employer has a good faith basis that the rule does not apply.

Expected legal challenges to the rule cropped up almost immediately, with tax services giant Ryan, LLC filing a Complaint in the Northern District of Texas, Dallas Division shortly after the FTC vote. Ryan, LLC v. Federal Trade Commission, 3:24-cv-00986 (N.D. Tex. Apr. 24, 2024). A statement released by the United States Chamber of Commerce called the FTC’s act a “blatant power grab that will undermine American businesses’ ability to remain competitive” prior to filing its own lawsuit in the Eastern District of Texas, Tyler Division. U.S. Chamber to Sue FTC Over Unlawful Power Grab on Noncompete Agreements Ban | U.S. Chamber of Commerce (uschamber.com); Chamber of Commerce of the United States of America, Business Roundtable, Texas Association of Business, and Longview Chamber of Commerce v. Federal Trade Commission and Lina Khan, 6:24-cv-00148 (E.D. Tex. Apr. 24, 2024).

So, what does this mean for Texas employers? While the current and anticipated legal challenges will likely delay (and, if successful, prevent) the rule from going into effect) employers should be mindful of any noncompetition agreements they have with past and current employ and former employees who are still within the term of their noncompetition restrictions.

An employer should also have legal counsel review other employee agreements that might otherwise restrict an employee’s ability to freely compete with it following their separation of employment, including but not limited to, non=solicitation agreements, NDAs, and employee repayment agreements and consider whether revisions might be needed to comply with rule after its effective date.

Finally, employers should consult with legal counsel and follow the status of the litigation challenging the rule to determine whether they need to send “clear and conspicuous” written notice to employees about the enforceability of those agreements by or before August 21, 2024.

Resources

FTC Final Rule

FTC Final Rule with Commentary

 

On April 23, 2024, the U.S. Department of Labor published a final rule raising the minimum weekly salary many exempt employees must be paid to qualify as exempt from overtime under the Fair Labor Standards Act.  The new rule raises the salary basis threshold for executive, administrative, professional and computer professional exempt employees from $684 per week ($35,568 per year) to $844 per week ($43,888 per year) beginning July 1, 2024.

Thereafter the minimum salary increases to $1,128 per week ($58,656 per year) on January 1, 2025.  Computer professionals may still be paid on an hourly basis at a rate of not less than $27.63 per hour, and professional and administrative employees may also be paid on a fee basis.

Highly compensated exempt employee salary thresholds are raised from $107,432 to $132,964 per year on July 1, 2024, and $151,164 per year on January 1, 2025.

The shortest increment of time over which an exempt employee can be paid a salary basis is one week although longer periods of time are permitted so long as the salary equates to at least the minimum weekly salary set by the rule.  This precludes the ability that an employee paid on a day rate to meet the requirement that the employee is paid on salary basis and therefore would not qualify as exempt.

Furthermore, the rule provides for automatic salary threshold increases once every 3 years starting in 2027 as determined by the Secretary of Labor.

The new rule is likely to be challenged in Court.  In 2016 when the Department made proposed changes to the salary basis thresholds, the implementation of the rule was blocked by court action and implementation was delayed and the salary threshold later lowered.  Some employers communicated or implemented changes in anticipation of the effective date of the rule increasing exempt employee salaries or converting employees to nonexempt.  When the rule’s effective date was delayed by the court and the salary that was finally implemented was less than initially proposed, employers were faced with challenging decisions about whether or how to roll back the changes.  Thus, employers may want to formulate their plans to comply with the new rule but delay communication and implementation of the plans to see if and when the rule becomes effective.

Steps Employer Should Take

  1. Audit all employees classified as exempt under the executive, administrative, professional, computer professional and highly compensated employee exemptions and determine whether the employees are paid on a salary basis at least as high as the new salary basis thresholds.
  2. For any employee who has a salary falling below new salary basis threshold, determine whether it is better for the employer to raise the employee’s salary to the new minimum or convert the employee to non-exempt, maintain accurate records of the employee’s working time and paying overtime.
  3. Set calendar reminders in advance on the dates that the minimum salary basis threshold is scheduled to increase and plan to make appropriate changes to exempt employee salaries to remain exempt or convert to nonexempt.

The Final Rule is accessible here.

The full commentary and text of the Final Rule is accessible here.

Today, the U.S. Supreme Court held that a Title VII plaintiff challenging a job transfer that was allegedly ordered because of her sex but did not result in a decrease in pay or benefits may still state a claim for relief if she can show the transfer brought about some harm with respect to an identifiable term or condition of employment.  The identifiable harm she must demonstrate need not be significant.  In Muldrow v. City of St. Louis, the plaintiff-employee brought suit against her employer after she was transferred from her job as a plainclothes officer to a uniformed officer position.  Her pay and rank remained the same, however, her schedule, responsibilities and perks changed.  Rather than working with high-ranking department officials on priority issues, her new work involved supervising the day-to-day activities of patrol officers and she lost access to the departmental vehicle she was able to take home.

The district court granted summary judgment and the court of appeals affirmed because Muldrow had not suffered a materially significant disadvantage and the job transfer made only minor changes to our working conditions and no changes to her title salary or benefits.  The Supreme Court reversed holding that while the plaintiff must show that the transfer brought about some harm with respect to an identifiable term or condition of employment, that harm need not be significant.  Further, the Court stated that the harms identified by Muldrow which included a less advantage work schedule, loss of a department vehicle and change in responsibilities met “that test with room to spare.”  Consequently, the Court reversed the summary judgment and remanded the case back to the trial court for further proceedings.

A full copy of the Court’s opinion is available here.

In an important case, the U.S. Supreme Court recently clarified generally the costs or expenditures an employer would have to incur before it can show that a particular accommodation of religious beliefs constitutes undue hardship under Title VII of the Civil Rights Act.  In a unanimous opinion, the Court held that an employer denying a religious accommodation to an employee must show that the burden of granting the accommodation would result in substantial increased costs in relation to the conduct of the employer’s business.

In that case, Gerald Groff is an Evangelical Christian who worked for the United State Postal Service.  A tenant of Groff’s religious belief is that Sunday should be devoted to rest and worship -not work.  When he started working at the postal service, his job did not generally require Sunday as the USPS did not ordinarily deliver mail on Sunday.  However, when the USPS entered into an agreement with Amazon to facilitate Amazon’s Sunday deliveries, the USPS began requiring employees to assist with Sunday deliveries.  To avoid Sunday work, Groff transferred to different USPS facilities.  However, eventually, he was unable to avoid working at facilities that did not require, at least on a rotating basis, work on Sunday.  When Groff was subjected to progressive discipline rather than work on Sunday, Groff resigned his employment and claimed constructive discharge.

The Court revisited the fifty-year old Hardison test for determining what constitutes undue hardship under Title VII.  The Hardison test had been interrupted by many lower courts as holding that an employer need not incur more than “de minimus” expense to accommodate an employee’s sincerely held religious belief.  The Supreme Court explained how the “more than de minimus cost” language found its way into their earlier decision and went on to state lower courts has misconstrued their holding by latching on the “de minimus” language while ignoring other references in Hardison to “substantial” “costs” or “expenditures.  And, the Court observed, Hardison’s principal issue was whether Title VII required an employer and union who agreed on a seniority system had to deprive senior employees of their seniority rights to accommodate a junior employee’s religious practices; not whether the costs incurred by the employer constituted undue hardship.

To clarify Hardison, the Court held that “’undue hardship’ is shown when a burden is substantial in the overall context of an employer’s business” when taking “into account all relevant factors in the case at hand, including the particular accommodations at issue and their practical impact in light of the nature, size and operating cost of an employer.”

The Court rejected Groff’s suggestion that the Court should incorporate the decades of jurisprudence construing “undue hardship” under the American’s with Disabilities Act jurisprudence into its Title VII undue hardship jurisprudence.  Similarly, the Court maintained its view that employers with bona fide seniority systems need not deprive more senior employees of their seniority rights to accommodate the religious beliefs of more junior employees.  And, the Court suggested (and the concurring opinion confirmed) that in evaluating an accommodation’s effect on the employer’s business, a court may consider the effect the proposed accommodation has on co-workers.  What will not constitute undue hardship, however, are the effects on the employer’s business caused by co-worker dislike of religious practice or expression in the workplace of the mere fact of accommodations in the workplace.  Other effects on co-workers, however, may well be considered.

Finally, the Court suggested that certain proposed accommodations may not satisfy the new undue hardship test like offering voluntary shift swapping, offering incentive pay for co-workers to pick up shifts where the costs are not substantial or the administrative costs of coordinating work coverage.  But at the end of the day, the Court left it to the lower court to work through these issues in the first instance and otherwise provided little guidance for employers.

The unanimous opinion in Groff v. Dejoy is available here.