By Liz Hartsel
In a significant development for employers nationwide, the U.S. Department of Labor’s (DOL) April 2024 Final Rule, which sought to raise the minimum salary threshold for overtime exemptions under the Fair Labor Standards Act (FLSA), was recently vacated by a Texas federal district court, restoring the prior thresholds.
The Court’s Decision
The court determined that the DOL exceeded its authority in adopting the 2024 Rule. The court also criticized the DOL’s inclusion of an indexing mechanism for automatic salary increases every three years, noting that it circumvented the procedural requirements of the Administrative Procedure Act.
As a result, the salary threshold reverts back to $684 per week for executive, administrative, and professional exemptions and $107,432 annually for highly compensated employees.
What Happens Next?
The DOL may choose to appeal the decision to the U.S. Court of Appeals for the Fifth Circuit. However, the odds of an appeal’s success will depend upon the incoming administration’s priorities, and the Trump Administration is likely to opt to draft a revised rule with a more modest increase or none at all.
Implications for Employers
- Evaluate Current Salary Levels: Employers who had adjusted salary levels in anticipation of the 2024 Rule should take stock of their options. While it is permissible to reduce salaries that were increased in preparation for the rule, employers should know that such actions could negatively impact employee morale and retention.
- Review State Laws: Employers operating in states with higher salary thresholds (e.g., Alaska, California, Colorado, Maine, New York, and Washington) must still meet requirements that comply with state law.
- Stay Informed: Businesses should prepare to adapt to changes pending an appeal or new rulemaking from the DOL. Fortis attorneys will be monitoring developments with both federal and state wage laws.
If you have questions about how this ruling affects your business or need assistance with compliance, contact me or another member of the employment law team at Fortis.
