Texas Court Blocks DOL Rule Increasing Exempt Employee Salary Levels
On Friday, November 15th, a Federal Judge in the US District Court for the Eastern District of Texas vacated the DOLs rule that was set to raise the minimum salary for the “white-collar” overtime exemption under the Fair Labor Standards Act (FLSA). This ruling means that the salary threshold increase that was scheduled for January 1, 2025, will not go into effect.
The DOL’s rule, which had initially raised the salary threshold from $684 per week ($35,568 annually) to $844 per week ($43,888 annually) in July 2024, and planned to increase it again to $1,128 per week ($58,656 annually) in January 2025, was found to exceed the DOL’s authority. The court said that, rather than considering the actual duties performed by employees, the DOL placed too much emphasis on salary levels which effectively turned the exemption criteria into a “salary-only” test.
The decision also invalidates the planned automatic updates that would have adjusted the salary threshold every three years, starting in 2027.
The DOL may consider appealing the lower court’s ruling; however, with the upcoming shift in the presidential administration, many experts anticipate that under new leadership, the DOL might opt to drop any appeal efforts, allowing the lower court’s ruling to remain in effect.
What should employers do?
With the salary threshold prior to July 1, 2024 reinstated, employers can classify white-collar employees as exempt if they meet the applicable duties test and earn at least $35,568 per year. The salary level for highly compensated employees is also reinstated to the previous threshold, $107,432 annually.
Employers who were planning to raise salary levels in January to meet the 2024 requirements, may now rethink those adjustments. If salaries were already increased to meet the July adjustment, employers are permitted to reduce those salaries but that move would likely be unpopular among employees. Employers should also note that any increases already paid cannot be recovered.
Employers should also be mindful of state-specific regulations, as several states have established their own, higher salary thresholds (including AK, CA, CO, ME, NY, and WA). Ensuring compliance with both federal and state requirements is essential to avoid compliance concerns.
Please don’t hesitate to reach out if you have any questions or need guidance on how these changes impact your business. Blueprint HRM is here to discuss your specific compliance needs and help you navigate these regulations.