In November, the U.S. District Court for the Eastern District of Texas blocked the U.S. Department of Labor’s (DOL) final rule discussed below. See Texas v. U.S. Dep’t of Lab., No. 4:24-CV-468-SDJ, 2024 WL 4806268 (E.D. Tex. Nov. 15, 2024).
The DOL rule would have raised the minimum salary that employers are required to pay employees to maintain their overtime exempt status under the federal Fair Labor Standards Act’s “white-collar exemptions” for executive, administrative and professional employees (the “EAP Exemption”) as follows:
- Beginning July 1, 2024, the minimum salary was increased to $43,888 per year. The final rule also raised the annual compensation threshold for “highly compensated” employees to $132,964 per year. (Note that some states, including Connecticut and New York, do not recognize the highly compensated employee exemption.)
- Beginning January 1, 2025, the final rule would have raised the salary threshold to $58,656 per year. The final rule would also have raised the annual compensation threshold for highly compensated employees to $151,164 per year.
- Beginning July 1, 2027, and every three years thereafter, the salary thresholds were supposed to automatically update.
The Texas court said that the DOL exceeded its authority by raising the threshold too high, and also by requiring automatic adjustments every three years. The court’s holding does apply to the July 2024 increase, so employers who made the adjustment may now wish to consider whether to reverse that increase.
This means that, for now, employers nationwide do not need to increase their salaried exempt employees’ salaries in January 2025, and the exemption levels for executive, administrative, and professional employees, and for highly compensated employees, revert to their respective levels under the 2019 regulations, which set the minimum salary at $35,568 for exempt employees and $107,432 for highly compensated employees.
The DOL has appealed the decision, but it remains to be seen whether the incoming administration will pursue the appeal.
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