DOL Increased Salary Threshold Rule Struck Down Nationwide

By James C. King and Kimberly J. Korando

On November 15, 2024, a District Court Judge for the Eastern District of Texas struck down the U.S. Department of Labor’s (DOL) 2024 final rule, which raised the minimum salary threshold levels for the FLSA’s “white-collar” exemptions. As a result, the 2024 final rule has been vacated nationwide. 

What this means for Employers:

Following the Court’s decision in Texas v. U.S. Department of Labor, the July 1, 2024, salary threshold increases have been repealed and the scheduled increases for January 1, 2025, will not go into effect. Consequently, the salary thresholds for the white-collar overtime exemptions have reverted to:

• $35,568 per year (with at least $684 paid on a weekly salary basis) for the executive, administrative, and professional exemptions; and
• $107,432 per year (with at least $684 paid on a weekly salary basis) for the highly compensated employee exemption.

Next steps for Employers:

Employers may want to re-evaluate any planned changes in employee compensation, compensation structure, or classification status. However, before putting any changes into motion, employers should:

• Consider the pros and cons of keeping previously approved but unannounced changes in compensation or classification intact.
  • For example, now may be a good time for an employer to mitigate their misclassification compliance risks by reclassifying exempt employees who do not clearly satisfy the FLSA’s duties test to non-exempt status.
• Consider potential impacts on employee morale for alterations to previously announced changes in compensation or classification.
  • Revoking previously announced or enacted raises has near universal disapproval amongst employees. Additionally, employees who revert to an exempt position after being informed of a change to non-exempt may raise concerns about proper classification with the DOL.
• Remain vigilant for state laws with salary thresholds in excess of the FLSA threshold amounts.
  • Alaska, California, Colorado, New York and Washington are among the states with higher salary thresholds than the DOL's regulations.
• Understand applicable state law notice obligations for changes in compensation.
  • State law varies regarding an employer’s obligations to provide notice for changes in compensation (both in terms of amounts and pay structure).

DOL has the right to appeal the District Court’s opinion to the Fifth Circuit Court of Appeals. However, historical precedent suggests it is unlikely that the DOL will pursue an appeal seeking reinstatement of the 2024 final rule following the upcoming change in administration. By way of example, the Trump administration’s DOL did not pursue an appeal of a District Court of Texas opinion invalidating the Obama administration’s DOL’s 2016 final rule.

If you have any questions regarding the impact of the vacated 2024 final rule, please do not hesitate to contact a member of Smith Anderson’s Workplace Law group. Additionally, we will continue to monitor these developments and will provide additional updates as necessary.