BlogLine

Federal judge invalidates DOL salary threshold changes

11/18/24

By: Sunshine R. Fellows

On Friday, November 15, 2024, the United States District Court for the Eastern District of Texas struck down the Department of Labor’s final rule increasing the minimum salary thresholds for workers to be considered exempt from overtime pay under the executive, administrative, and professional exemptions to the Fair Labor Standards Act. Citing the United States Supreme Court’s recent Loper Bright decision overruling Chevron deference, District Court Judge Sean D. Jordan found that the DOL “exceeded the authority delegated by Congress” in issuing the rule. Judge Jordan further noted that an “employee’s status [must] turn on duties – not salary[,]” and the Final Rule impermissibly “make[s] salary predominate over duties for millions of employees[.]”   

The Texas federal court’s ruling applies nationwide and means that employers do not currently need to increase employee salaries in January 2025 to maintain their exempt status. Judge Jordan’s decision vacates the entire rule, including the increases that took effect in July 2024. While the Department can appeal the ruling to the Fifth Circuit, the appeal will not be resolved before the new administration takes office in January 2025, so the likelihood of the rule being resuscitated on appeal is unlikely. 

The DOL’s April 2024 final rule entitled Defining and Delimiting the Exceptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees increased the minimum weekly salary threshold from $684 per week ($35,568/year) to $844 per week ($43,888/year), with additional increases in January of 2025 ($1,128/week or $58,656/year), July 1, 2027, and every three years thereafter. The rule also increased the minimum total annual compensation level for exemption as a “highly compensated employee” – one who customarily and regularly performs any one or more of the exempt duties or responsibilities of a white collar employee – from $107,432 to $132,964 effective July 1, 2024, and to $151,164 effective January 1, 2025.   

In light of the court’s decision, the minimum salary threshold is once again set to $35,568, and the threshold for highly compensated employees is set to $107,432. Employers should keep in mind that some states have minimum salaries for an exemption that will continue to be higher than the minimum salary under federal law. In New York, for example, the minimum salary for exemption as an executive or administrative employee in New York City, Long Island, and Westchester County currently is $1,200 per week ($62,400/year), increasing to $1,237.50 per week ($64,350/year) on January 1, 2025. In California, exempt employees must earn no less than two times the State’s minimum wage for full-time work (currently $66,560/year) to meet the state’s EAP employee exemption test. 

For more information on the topic, contact Sunshine R. Fellows at sunshine.fellows@fmglaw.com or your local FMG relationship partner.