Federal Court Strikes Down U.S. DOL Overtime Exemptions Rule Nationwide on White-Collar Exemption Salary Threshold Ruling

On November 15, 2024, a Texas federal court struck down a U.S. Department of Labor (DOL) rule that raised the minimum salary required to be paid to most employees classified as exempt from overtime and minimum wage requirements under the Fair Labor Standards Act (FLSA).

 The court’s decision blocks the minimum compensation increases that were scheduled to go into effect on January 1, 2025, and invalidates the previously required July 1, 2024, increases nationwide. 

Court Said DOL Exceeded Authority:

On April 23, the DOL announced a final rule to increase the salary thresholds for the EAP exemptions (89 F.R. 32842, 4-26-24). The court held that each of the three parts of the April rule exceeded the DOL's statutory authority under the FLSA:

(1) On July 1, the minimum salary level for exempt employees would have increased to $844 per week ($43,888 per year).

(2) On January 1, 2025, the minimum salary level would have increased again to $1,128 per week ($58,656 per year); and

(3) The salary level would have been updated every 3 years to match the 35th percentile of weekly earnings of full-time salaried workers in the lowest-wage Census Region.

What This Means for Now:

• The court's decision blocks the minimum compensation increases that were scheduled to go into effect on January 1, 2025, and invalidates the previously required July 1, 2024, increases nationwide.
• Effective immediately, the salary level test amount for executive, administrative and professional employees returns to $684 per week ($35,568 annually) and the required amount to be paid to HCEs returns to $107,432 annually (including at least $684 per week paid on a salary or fee basis).
• The DOL could decide to appeal the court's ruling, and an appeals court could either uphold the lower court's ruling or reverse the lower court's ruling. This could occur prior to President-Elect Trump taking office. It's also possible that any such appeal is still pending when President-Elect Trump takes office on January 20, 2025. The Trump administration could choose to abandon such an appeal and could also choose to issue a new rule.
• Employers that have already raised compensation amounts based on the final rule might be considering whether to now decrease amounts based on prior DOL requirements. If you are planning to decrease amounts or are planning to not increase amounts in the future that have been previously communicated (e.g., increases that were planned for January 1, 2025), then you should discuss your strategy with counsel.
• Finally, be prepared to communicate any changes to employees promptly and in writing, taking into consideration any state or local requirements governing the timing of pay change notifications.

We will continue to monitor this topic and update as any new rulings are released.