.png)
Summary:
On November 15, 2024, the U.S. District Court for the Eastern District of Texas struck down the U.S. Department of Labor’s (DOL) rule increasing the salary threshold for the white-collar overtime exemption under the Fair Labor Standards Act (FLSA). The court ruled that the DOL exceeded its statutory authority with the rule, which is now invalidated nationwide.
Key Takeaways:
July 2024 and January 2025 Increases Nullified: The court vacated the rule, nullifying the salary threshold increase that took effect in July 2024 and preventing the January 2025 increase from going into effect.
Automatic Updates Struck Down: The court also invalidated the rule’s provision for automatic salary threshold increases every three years.
Employer Impact: Employers that adjusted salaries to comply with the now-invalid July 2024 threshold are advised to consult legal counsel before making changes.
The DOL’s 2024 rule aimed to raise the white-collar exemption salary threshold to $43,888 annually as of July 2024 and to $58,656 annually by January 2025, with automatic updates every three years. The rule would have expanded overtime eligibility for about four million salaried workers.
The court held that these increases created a “salary-only” test, contradicting the FLSA’s focus on job duties and exceeding the DOL’s authority. The judge not only invalidated the phase-two salary increase to $59,000 scheduled for January 1, but also overturned the initial July increase to $44,000 and the provision for automatic adjustments every three years, reverting the threshold to approximately $35,000 for the time being.
What’s Next? The January 2025 increase will not go into effect, and the July 2024 increase is legally nullified. Employers should remain vigilant, as some states maintain higher salary thresholds than the federal standard. While the DOL may appeal, a change in administration could influence future regulatory actions.
This ruling is likely to attract significant attention and could prompt closer scrutiny of exemption classifications by employees and plaintiff attorneys. Consequently, it’s a prudent time for companies to review job roles to ensure the duties performed meet exemption criteria. Management Southwest conducts exemption reviews on a flat rate basis. Contact Jeffrey Ball, Esq. at jeffrey.ball@managementsouthwest.com
Stay tuned for updates as this decision impacts employers nationwide.