DOL Salary Threshold Increases Overturned

A federal court in Texas recently set aside and vacated the final rule (“Rule”) that the U.S. Department of Labor (“DOL”) had issued earlier this year that had, among other things, raised the Fair Labor Standards Act (“FLSA”) salary threshold for classifying executive, professional, and administrative employees as being exempt from federal overtime requirements.
The Rule, which was effective July 1, 2024, increased the salary threshold to $844 per week ($43,888 annually) and also provided that effective January 1, 2025, the salary threshold would further increase to $1,128 per week ($58,656 annually), and then the threshold would automatically increase every three years thereafter. Additionally, as to highly compensated employees the Rule increased the total annual compensation requirement to at least $132,964 and, effective January 1, 2025, would have increased the total annual salary to at least $151,164.
In November 2024, the U.S. District Court for the Eastern District of Texas entered an order that overturned the Rule in its entirety. The federal court order applies to all employers nationwide.
The DOL recently filed an appeal seeking to reverse the order that invalidated the Rule. The appeal is in its early stages and the outcome is uncertain at this point. We will continue to monitor this matter.
For now, the Rule is not in effect and is not enforceable. This means that the salary threshold increases set out in the Rule no longer need to be followed. In other words, the DOL’s 2019 rule applies: For an employee to be exempt under the FLSA executive, administrative, or professional exemption, the employee must be paid on a salary basis of at least $684 per week ($35,568 annually) and must satisfy the duties test. Also, the highly compensated employee exemption salary threshold remains at least $107,432.
Employers are not legally required to continue with the changes to employee compensation or exemption status that may have been put in place to comply with the first phase of the Rule in July 2024. However, reversing those changes could have negative impacts on employee relations and morale. Further, employers are free to make salary increases for determining eligibility for overtime consistent with the second phase of the Rule effective on January 1, 2025. An employer should consult with an attorney and carefully consider the communication that will accompany any change or continuation of the salary limits for overtime.
The federal court decision does not change state or local wage and hour laws or regulations, so employers should consider the laws in all states and counties in which they do business to determine if there is any state or local law or regulation that may set higher salary thresholds or different requirements than the federal rules. Please contact Julie M. Ryan at (402) 392-1250 to learn more.