On November 15, 2024, the U.S. District Court for the Eastern District of Texas vacated the U.S. Department of Labor’s (DOL) final rule to amend current requirements that employees in white-collar occupations must satisfy to qualify for an overtime exemption under the Fair Labor Standards Act (FLSA). This ruling sets aside the final rule’s increases to the standard salary level nationwide, returning the salary threshold to the pre-July 2024 threshold.

Background

The FLSA white-collar exemptions apply to individuals in executive, administrative, professional positions, and some outside sales and computer-related occupations. Some highly compensated employees may also qualify for the FLSA white-collar overtime exemption. To qualify for this exemption, white-collar employees must satisfy the standard salary level test, among other criteria.

2024 Final Rule

On April 23, 2024, the DOL announced a final rule to amend current salary threshold requirements that employees in white-collar occupations must satisfy to qualify for an FLSA overtime exemption.

The final rule increased the standard salary level, starting July 1, 2024, from:

  • $684 to $844 per week ($35,568 to $43,888 per year) for individuals in executive, administrative, professional positions; and
  • $107,432 to $132,964 per year for highly compensated employees.

On January 1, 2025, the standard salary level was set to increase again from:

  • $844 to $1,128 per week ($43,888 to $58,656 per year) for individuals in executive, administrative, professional positions; and
  • $132,964 to $151,164 per year for highly compensated employees.

The rule also enabled the DOL to update salary levels automatically every three years starting on July 1, 2027.

Court Case and Impact

The District Court held that the DOL exceeded its statutory authority by increasing the standard salary level too high and allowing for automatic adjustments every three years. The court vacated the salary increase that went into effect in July and the increase set for January, as well as the future automatic salary threshold increases for employers nationwide. As a result of the decision, the standard salary threshold for individuals in executive, administrative, professional positions is now $35,568 and $107,432 for highly compensated employees. Consequently, employees who lost their exempt classification because of the July 1, 2024 salary level increase may potentially qualify again for an exemption.

What’s Next?

The DOL may seek to appeal the District Court’s ruling; however, if the department appeals the ruling, the incoming Trump administration will likely abandon the appeal.

Employers should continue to monitor the situation, but those planning to increase salaries January 1 to the new threshold can now evaluate that decision.

Helpside recommends that salaries changed on July 1 to meet that threshold not be reduced as the negative impact on employee relations could be severe.

Any positions that were moved from exempt to non-exempt as a result of the new salary threshold can be re-evaluated.

If you have any questions, please reach out to the HR team at Helpside at humanresources@helpside.com.