In a major decision issued on Friday, Nov. 15, 2024, the U.S. District Court for the Eastern District of Texas struck down a Department of Labor (DOL) rule that raised the minimum salary threshold required for executive, administrative and professional employees to be exempt from minimum wage and overtime pay under the Fair Labor Standards Act (FLSA). Notably, this decision applies to all employers nationwide.
As we previously reported, in April of 2024, the DOL issued a final rule that raised the minimum salary threshold that an employee must earn to qualify for the “white collar” exemptions. The rule would take effect in three phases. The first phase of the rule took effect July 1, 2024, and raised the salary threshold from $684 per week to $844 per week. The second phase, which was scheduled for Jan. 1, 2025, would have raised the salary threshold to $1,128 per week. The third and final phase would have implemented a mechanism to automatically increase the salary threshold once every three years, beginning July 1, 2027, based on contemporary earnings data. Litigation over this rule ensued and, on June 28, 2024, the Eastern District of Texas preliminarily enjoined it as likely unlawful, but only for employees of the state of Texas.
In Friday’s decision, the Eastern District of Texas held that the DOL exceeded the authority delegated to it by Congress in enacting the April 2024 rule. Specifically, the court found that the July and Jan. salary increases created a de facto “salary only” test for the white collar FLSA exemption that effectively eliminated consideration of whether an employee performs the required bona fide executive, administrative or professional duties. In addition, the court found that implementing automatic increases in the salary threshold every three years was unlawful because it evaded the notice and comment process required for administrative rulemaking. As a result, the court nullified and vacated the entire rule on a nationwide basis.
In sum, neither the Jan. 1, 2025, increase to the white collar exemptions’ salary threshold, nor the subsequent automatic increases outlined will go into effect. Further, the already implemented July 1, 2024, salary threshold increase is nullified.
Warner Employment News from the Law Shanty
Steve Palazzolo released a new Law Shanty video on this topic the day after the court issued a nationwide invalidation of the FLSA Salary Level Test rule on Friday, Nov. 15. In the video, Steve takes a deep dive into the rule’s history, exploring its evolution through various presidential administrations and provides employers with crucial insights on what they need to know today. He also offers a word of caution for employers considering salary reductions for employees whose pay was raised in July.
See video here
