In a development reminiscent of what took place in November 2016, on Friday, November 15, 2024, a federal Judge in Texas set aside and vacated the federal Department of Labor’s (DOL) new rule that would have substantially increased the minimum salary for executive, administrative, and professional (EAP) employees to be exempt from overtime pay requirements under the federal Fair Labor Standards Act (FLSA). Under the rule, the minimum salary already increased on July 1, 2024, and was scheduled to increase again on January 1, 2025.
In a nutshell, the Court concluded that the DOL exceeded its authority by essentially creating a salary only test for the EAP exemption, effectively eliminating the consideration of whether an individual performs EAP duties. Consideration of such duties is supposed to be the key when determining whether or not an employee is exempt.
As a result of the Court’s decision, the new rule (including the portion that already took effect on July 1, 2024) is blocked, and the salary threshold that existed prior to July 1, 2024 remains in effect. See this link for the rates prior to July 1, 2024, as well as the rates that are now blocked. Note that certain states have higher salary thresholds than under the FLSA. You can read the Court’s opinion here.
Is This The End of The Case?
Most likely. The DOL could appeal to the Fifth Circuit Court of Appeals, although the Court of Appeals probably would uphold the decision. Further, given the upcoming change in administrations, it also seems likely that the DOL will abandon any such appeal before the Court of Appeals would have the chance to consider it.
What Should Employers Do Now?
Some employers may have previously given raises to allow employees to remain exempt under the now-blocked rule’s July 1, 2024, deadline; or, they may have reclassified employees as non-exempt and are now paying them overtime pay. Some employers may have already announced such changes in anticipation of the January 1, 2025, deadline. With the rule now blocked, employers may have difficult choices to make about what they should do now. Because such decisions will be unique to every employer and will involve both legal and non-legal considerations, employers should not act hastily. Instead, they should seek legal advice to discuss their specific situation.
