As we previously reported, on April 23, 2024, the Department of Labor (DOL) issued an updated final overtime rule, which raised the annual salary required for executive, administrative and professional (“EAP”) employees and highly compensated employees (“HCE”) to be exempt from overtime under the Fair Labor Standards Act (FLSA).

Despite several legal challenges, the rule goes into effect on July 1, 2024 for every employer except the State of Texas. On Friday, June 28, 2024, the State of Texas was able to secure a preliminary injunction which would postpone the effective date—but the Court granted the injunction only for the State of Texas as an employer. For now, all other employers across the nation will need to comply with the final rule.

Unless certain exemptions apply, employees who work more than forty (40) hours in a workweek must be paid overtime.  To qualify for the EAP exemption, the employee must meet three tests: 1) be paid a salary on a predetermined and fixed amount that is not subject to reduction based on the quality or quantity of work performed; 2) be paid at least a specified weekly salary level, and 3) perform primarily executive, administrative, or professional duties.  The HCE exemption applies to employees who are paid a salary, earn above a set annual compensation threshold, and satisfy a minimal duties test.

Effective July 1, 2024, the new rule raises the minimum salary threshold for the EAP and HCE exemptions:

1. Under the EAP exemption, the minimum salary threshold will be raised from $684 per week ($35,568 per year) to $844 per week ($43,888 per year);
2. Under the HCE exemption, the annual compensation threshold will be increased from $107,432 per year, including at least $684 per week paid on a salary or fee basis, to $132,964 per year, including at least $844 per week paid on a salary or fee basis.

Effective January 1, 2025, the salary thresholds for these exemptions will again be raised as follows:

1. The EAP minimum salary threshold will be increased to $1,128 per week ($58,656 per year);
2. The HCE annual compensation threshold will be increased to $151,164 per year, including at least $1,128 per week paid on a salary or fee basis.

As previously reported, the practical result of this rule is that many employees currently classified as exempt under the FLSA overtime rules may now fall below the adjusted minimum salary thresholds described above.  Therefore, this subset of newly classified employees must be paid overtime if they work more than forty (40) hours in a given week.

A second case filed in the Eastern District of Texas on behalf of numerous business associations has been consolidated with the case brought by the State of Texas. In Friday’s decision the Court noted that no preliminary injunction was filed in the second case. It is possible that these associations, who presumably represent employers across the nation, may very well move for injunctive relief to postpone the rule. We will continue to monitor events on this decision and will provide updates as they are released.

If you have questions about the final rule, or any questions about wage and hour issues, please contact Sally Piefer at 414-226-4818 or spiefer@lindner-marsack.com, or another member of the employment team at Lindner & Marsack.