By: Oyvind Wistrom<\/p>\n
Late last week a federal district court in Texas struck down the Department of Labor (DOL) rule that was set to increase the salary thresholds again for exempt white-collar executive, professional and administrative employees (EAP) under the Fair Labor Standards Act (FLSA).\u00a0 The court ruling not only impacts the salary increase scheduled to take effect on January 1, 2025, but also invalidates the prior salary increase that took effect in July, 2024.<\/p>\n
In April 2024, the DOL passed a final rule that made several significant changes to the FLSA, which included (1) raising the minimum weekly salary threshold for white collar executive, professional and administrative employees from $684 per week to $844 per week ($43,888 annually); (2) the rule was further set to increase the salary threshold to $1,128 per week ($58,656 annually) as of January 1, 2025; and (3) it would have adjusted the salary threshold every three years thereafter based on then current wage data. \u00a0The DOL rule also made changes to the highly compensated employee (HCE) exemption that raised the minimum salary to $132,964 on July 1, 2024, and was set to increase that threshold to $151,164 as of January 1, 2025.<\/p>\n
On November 15, 2024, U.S. District Judge Sean Jordan for the Eastern District of Texas granted summary judgment in Texas v. Department of Labor, <\/em>to the state of Texas and a group of business organizations, striking down the DOL\u2019s April 2024 rule that raised the minimum salary for the FLSA\u2019s executive, administrative, and professional employee overtime exemption. \u00a0Judge Jordan concluded that while the DOL may use salary as a part of its authority to define the white-collar exemptions under the FLSA, such a salary-basis test \u201cis not included in the statutory text\u201d and \u201cis not unbounded.\u201d\u00a0 The Court determined that \u201cthe Department\u2019s changes to the minimum salary level in the 2024 Rule exceed its statutory jurisdiction.\u201d<\/p>\n While the decision did not directly analyze the HCE exemption, Judge Jordan wrote in a footnote that the court\u2019s \u201canalysis regarding the legality of the changes to the standard salary level applies equally to the Department\u2019s changes to the HCE level.\u201d<\/p>\n The ruling from the Texas court vacates the DOL\u2019s rule in its entirety nationwide, including the salary increase that went into effect on July 1, 2024.\u00a0 As a result, the salary threshold exempt status reverts back to the DOL\u2019s 2019 rule, which set the EAP exemption at $684 per week ($35,568 annually), and the HCE exemption at $107,432 per year.\u00a0 However, it is likely that the DOL will appeal the decision to the Fifth Circuit Court of Appeals, so the final chapter on this issue has yet to be written.\u00a0 However, for the time being employers can delay any anticipated salary increases that were scheduled to take effect on January 1, 2025, to ensure that certain exempt workers stayed current with the salary requirements of the FLSA.<\/p>\n