On Friday November 15, 2024, a Texas federal court struck down the U.S. Department of Labor’s 2024 Final Rule increasing the salary threshold for the Administration, Executive, and Professional (EAP or “white collar”) exemptions, as well as the highly compensated employee (HCE) exemption, under the Fair Labor Standards Act. The first phase of the DOL rule, which went into effect on July 1, 2024, increased the minimum salary level for the EAP exemptions from $684 per week to $844 per week and increased the salary threshold for the highly compensated employee exemption from $107,732 per year to $132,964 per year.
The next phase of the rule, which was slated to take effect on January 1, 2025, would have increased the salary threshold for the EAP exemptions significantly, from $844 per week ($43,888 annually) to $1,128 per week ($58,656 annually). The rule also increased the salary threshold for the highly compensated employee exemption and implemented a mechanism to automatically increase the salary level triennially based on contemporary earnings data. The January 1 deadline would have affected millions.
The decision
In his decision in State of Texas v. United States Department of Labor, Judge Sean Jordan of the U.S. District Court for the Eastern District of Texas vacated and remanded the rule on a nationwide basis. Citing to Mayfield v. DOL, the court held that while the DOL does have the authority to implement salary thresholds for the EAP exemptions, that authority must operate “within limits” – and this rule exceeded the DOL’s limited authority. In reaching this conclusion, the court said the rule attempted “sweeping changes to the regulatory framework, designed on their face to effectively displace the FLSA’s duties test with a predominate – if not exclusive – salary-level test.”
What happens next?
The incoming Trump administration will likely seek to halt any perceived overreach by government agencies, including the DOL. Nevertheless, the DOL can appeal this ruling to the Fifth Circuit Court of Appeals in Texas. For the time being, however, the DOL’s January 1, 2025, salary increases will not go into effect, and any adjustments planned by employers in anticipation of this second-phase increase can be discontinued.
As part of the Order, Judge Jordan did specify that the July 2024 increase exceeded the DOL’s authority under the FLSA. For those employers that are considering rolling back any adjustments made in July to comply with rule’s first-phase threshold, you should contact your McAfee & Taft Employment Group lawyer to discuss this in more detail. Employers should be cautioned to balance the possible pending appeal of this Texas decision and the incoming Trump administration with employee morale concerns that may result from any rollbacks of changes already implemented.
- State of Texas v. United States Department of Labor, E.D. Tex., Civil No. 4:24-CV-499-SDJ
