December 23rd, 2024
Federal Court Strikes Down DOL’s Salary Threshold Increases for Overtime Exemptions
Posted in: Employment Law Tagged: Darla J. McClure
Author: Darla J. McClure
The U.S. District Court for the Eastern District of Texas struck down the U.S. Department of Labor (DOL)’s final rule increasing the salary thresholds for “white collar” (WC) and “highly compensated employee” (HCE) exemptions under the Fair Labor Standards Act (FLSA) overtime eligibility requirements.
In April 2024, the DOL announced the final rule, and a salary threshold increase took effect on July 1, 2024. Prior to this increase, the weekly salary threshold for determining overtime eligibility was $684, meaning if an employee was paid a fixed salary of at least $35,568 per year (and primarily performed executive, administrative or professional duties), that employee would be ineligible for overtime pay. Starting on July 1, 2024, the weekly salary threshold for WC exemptions increased to $844, which is equivalent to an annual salary of $43,888. Like WC exemptions, the Annual Compensation threshold for the HCE exemption increased from $107,432 to $132,964. The Final Rule also included automatic future increases set to take effect on January 1, 2025, July 1, 2027, and every three years thereafter.
Before the salary threshold increase went into effect, the U.S. District Court for the Eastern District of Texas issued an injunction to the new regulations pertaining only to the State of Texas in its role as an employer of state workers. The court found that the DOL did not have authority to set automatic threshold increases or create salary only rules for WC and HCE exemptions. On November 15, 2024, the court has ruled that not only should the injunction apply to the State of Texas it will apply on a nationwide basis which effectively canceled the July 1, 2024, increase that went into effect and blocks the scheduled 2025 increase.
Currently, the overtime requirements have reverted to the DOL’s 2019 salary threshold. Employers who have already adjusted their payroll should consult with their legal counsel to determine the next course of action regarding walking back increases or future changes to the threshold.
The DOL filed an appeal in November in hopes of overturning the decision. It is unclear if the appeal will be expedited for it to be resolved before the new administration takes office, which is likely to have an impact on the next course of action.
If you have any questions about the court’s decision or how best to prepare for its potential implications, please contact an attorney in our employment law department.
