Texas Court Vacates DOL Rule Increasing Salary Threshold for FLSA Overtime Exemptions
On November 15, 2024, the U.S. District Court for the Eastern District of Texas invalidated the Department of Labor’s (“DOL”) April 2024 rule increasing the salary threshold for employees to be exempt from overtime and minimum wage requirements under the Fair Labor Standards Act (“FLSA”). The ruling strikes down the rule on a nationwide basis, reasoning that the DOL exceeded its authority delegated by Congress in making the regulatory change.
In April of 2024, the DOL announced its 2024 final rule altering certain regulations relating to Section 13(a)(1) of the FLSA (the “white-collar exemptions”), including raising the required threshold salary. Under the final rule, the salary threshold was increased from $684 to $844 per week (from $35,568 to $43,888 annually) effective July 1, 2024, and was set to further increase to $1,128 per week ($58,656 annually) on January 1, 2025. The April 2024 rule also increased the total compensation threshold for FLSA’s highly compensated employee exemption. For additional information regarding the April 2024 rule, see the following client alert: https://bit.ly/3Uuq4Wp
Unless overturned on appeal, the Texas court’s November 15th decision will have an immediate, significant effect on the nation’s employers. It returns the minimum salary threshold required for an employee to qualify as exempt from FLSA’s overtime and minimum wage requirements to the salary threshold set in 2019 regulations ($684 per week, $35,568 annually). The DOL has the right to appeal the decision to the 5th Circuit Court of Appeals; however, with the new presidential administration taking office in January, the chances of reviving the increased salary threshold on appeal seem unlikely. Employers are cautioned that this decision does not affect FLSA’s requirement that in order to be exempt from overtime and minimum wage requirements, an employee’s job duties must meet one of the exemption “tests” (e.g., professional, administrative, executive, etc.). Meeting the salary threshold alone is not enough; it is one part of the test. The professional, administrative, and executive “duties tests” were unchanged in the April 2024 DOL rule struck down by the Texas court.
Employers with questions about minimum wage and overtime requirements should contact Nikole Canute, Scott Dwyer, Nate Wolf, Dominic Clolinger, Kathryn Stegink, or Yue (April) Li as soon as practicable.
