Update: FLSA Overtime Rule Invalidated by Federal Judge
November 21, 2024On November 7, 2024, we published an alert outlining scheduled changes in the Fair Labor Standards Act’s ("FLSA") salary level test. Eight days later, on November 15th, a judge in the United States District Court for the Eastern District of Texas set aside and vacated the Department of Labor (“DOL”)’s 2024 Rule. This decision effectively returns the minimum salary threshold requirements for employees considered exempt from overtime pay under the FLSA to 2019 levels. Specifically, employees who otherwise perform duties that qualify for an executive, administrative, or professional exemption are required to be paid a minimum salary of $684 per week ($35,568 per year).
This means that the July 2024 increase that took effect due to the 2024 Rule, and which raised the minimum salary threshold from $684 per week to $844 per week ($43,888 per year), is no longer valid. This also means that the scheduled January 2025 increase, raising the minimum required salary to $1,128 per week ($58,656 per year), as well as future inflation-based increases, are no longer required.
The practical impacts of this ruling are significant. First, currently-exempt workers who satisfy one of the FLSA’s duties tests will remain exempt in 2025, even if their salary is less than $58,656. Second, employees who lost their exemption in July because their salary was between $35,568 and $43,888 will once again qualify for an overtime exemption. Third, those highly-compensated employees who either lost their exemption in July or were slated to do so in January will remain exempt so long as their total compensation is at least $107,432 – the figure set back in 2019.
Although the current administration may appeal the judge’s ruling, it is unlikely that any review will occur before the new administration takes office in January. It is widely anticipated that the Trump DOL may not prosecute any appeal and that the ruling will stand as is.
Faced with this turn of events, employers may wish to reconsider planned New Year’s salary increases where the primary purpose was to preserve an overtime exemption. Similarly, employers should consider reevaluating the exemption status of employees who lost their exemption in July due to the first round of now-invalidated salary level increases. If you would like to discuss a way forward in light of this development, please contact your Lewis Rice Labor & Employment attorney.
