On Friday, November 15, 2024, the United States District Court for the Eastern District of Texas (“District Court”) issued a decision invalidating the April 2024 Department of Labor (“DOL”) rule which increased the minimum salary threshold for executive, administrative or professional (“EAP”) employees to be exempt from the Federal Labor Standards Act (“FLSA”) overtime requirements. As a reminder, the April 2024 DOL rule set two changes to the salary threshold for EAP exempt employees: a) $844 per week or $43,888 annually beginning on July 1, 2024; and b) $1,128 per week or $58,656 annually beginning on January 1, 2025. This decision blocks the July 1, 2024 and January 1, 2025 increases from taking effect.
The Decision
The District Court explained that the DOL exceeded its rulemaking authority because it only has the Congressionally-delegated authority to “define” and “delimit” EAP exempt employees. In the Court’s view, the DOL impermissibly increased the importance of the salary aspect of the EAP exemption test over the duties component of the test.
In essence, this decision reminds all employers that the duties test is critical for determining the exempt status of an employee. If you are feeling a bit of déjà vu, you are not alone. This decision tracks with a similar challenge to the Obama administration’s 2016 rule, which also attempted to dramatically increase the salary threshold.
With this ruling, the salary threshold for exempt status reverts back to the limit set by the DOL in 2019 (i.e., $684 per week or $35,568 annually). The DOL could appeal the decision to the Fifth Circuit Court of Appeals. However, given the post-election climate, it is uncertain if an appeal will be filed before the changes to the new Administration take place in January 2025, and if an appeal is made before then, whether it would survive under the new Administration.
What Now?
Many employers are wondering what to do if they already implemented the first set of increases in July 2024. While the April 2024 DOL rule is now struck down and reverting salaries back to the 2019 DOL threshold may be legally permitted, before taking any action to rescind those July increases going forward, employers should consult with legal counsel. In addition, despite the District Court’s action on the April 2024 DOL rule, employers should keep in mind that many states have their own laws pertaining to thresholds applicable to salary exemptions and notification requirements.
If you have questions about this decision, please contact a member of our Labor & Employment Law Team.
