On November 15, 2024, the U.S. District Court for the Eastern District of Texas issued a ruling that vacated the Department of Labor’s (DOL) recent changes to overtime salary thresholds. This decision, effective nationwide, has significant implications for employers navigating wage and hour compliance under the Fair Labor Standards Act (FLSA).
The overturned rule, finalized on April 23, 2024, proposed the following changes to the salary threshold for exempt employees (those not entitled to overtime pay):
- Raising the salary threshold from $684 per week ($35,568 annually) to $844 per week ($43,888 annually), effective July 1, 2024.
- Further increasing the threshold to $1,128 per week ($58,656 annually), scheduled for January 1, 2025.
However, with the court’s recent decision, employers no longer need to implement these increases.
Key Points From The Court’s Decision
The court’s ruling centers on the DOL’s authority to set salary thresholds for overtime exemptions. While the FLSA allows the DOL to define and delimit exemptions for bona fide executive, administrative, and professional (EAP) employees, the court found that the 2024 rule overstepped this authority. Specifically, the rule’s high salary thresholds were seen as overshadowing the duties-based test required to determine exemption status.
In a related case earlier in 2024, the Fifth Circuit Court of Appeals emphasized that while salary can serve as an objective measure for exemption, it must not replace the primary consideration of job duties. The District Court echoed this sentiment, concluding that the 2024 rule’s salary increases effectively nullified the duties-based exemption criteria.
What’s Next?
The DOL may appeal the decision but given the court’s reasoning and the upcoming change in presidential administration, the likelihood of the rule’s revival appears slim. For now, the pre-2024 thresholds remain in place:
- A salary threshold of $684 per week ($35,568 annually) for exempt EAP employees.
- A highly compensated employee (HCE) threshold of $107,432 annually.
Staying updated on these developments as the situation evolves is critical for employers to ensure compliance and minimize disruptions.
Navigating Compliance Amid Uncertainty
The court’s ruling highlights the ongoing challenges businesses face in maintaining compliance with labor laws. Wage and hour regulations frequently change, making it essential for employers to stay informed and prepared.
At Group Management Services (GMS), we understand the complexities of workforce management. Our team of HR experts work closely with businesses to navigate regulatory changes, ensuring compliance and reducing administrative burdens. From policy updates to payroll management, we offer comprehensive solutions tailored to your needs. Contact us today to learn how we can help your business thrive.