In 2024, the U.S. Department of Labor (“DOL”) implemented a final rule that raised the salary thresholds for classifying certain employees as exempt from overtime pay under the Fair Labor Standards Act (“FLSA”). The rule, which was set to increase these thresholds in two phases—one in July 2024 and another in January 2025—was expected to expand overtime eligibility to approximately four million employees. The rule also included automatic adjustments to the salary thresholds every three years based on Census data. However, a federal court in Texas blocked the rule nationwide on November 15, 2024, effectively reinstating the prior, lower salary thresholds established under the Trump administration in 2019.
The legal challenge to the DOL’s 2024 rule was filed by business groups and the State of Texas, arguing that the DOL overstepped its authority under the FLSA and the Administrative Procedure Act (“APA”). The case was heard in the Eastern District of Texas, where U.S. District Judge Sean Jordan ruled that the DOL had exceeded its authority by implementing a salary-based exemption test that overshadowed the FLSA’s original duties test. This ruling halts the salary threshold increases that were set to take effect in 2025 and reverts the salary thresholds to pre-2024 levels: $35,568 per year for white-collar employees and $107,432 per year for highly compensated employees.
As a result of the court’s decision, employers must now follow the lower salary thresholds unless the DOL decides to appeal the ruling. Employers who had already made adjustments in anticipation of the higher thresholds may need to revert these changes, though this could affect employee morale. Additionally, state laws, such as those in California and New York, have higher thresholds than the federal FLSA rules, which remain unaffected by the court’s decision. While a future administration may attempt to reissue a new rule to increase the salary thresholds, it is unlikely to match the scale of the 2024 changes. Employers are advised to monitor further developments and continue applying the existing FLSA duties test when classifying employees.
To ensure compliance with these new requirements, contact us at info@mnklawyers.com.
