CLIENT ALERT: On November 15, 2024, a Texas federal court struck down the U.S. Department of Labor’s (DOL) new rule that substantially raised the minimum salary amount for employers to claim the Fair Labor Standards Act’s (FLSA) executive, administrative, and professional (EAP) overtime exemptions. The court found that the rule exceeded the DOL’s authority. The ruling also halted the rule’s automatic adjustment of the salary levels every three years, and a new higher salary level for the highly compensated employee (HCE) exemption. It is unclear if the DOL will appeal the ruling or if the new administration in Washington will abandon the rule or any appeal. The court’s ruling applies nationwide to all employers covered by the FLSA.
Recall, the DOL rule had raised the minimum EAP salary level to $43,888 on July 1, 2024, which itself was set to increase to $58,656 effective January 1, 2025. As a result of the ruling, the minimum salary level immediately returns to the amount before the rule — $35,568. The minimum salary for the HCE exemption returns to $107,432.
Employers who may have raised salaries to comply with the rule, or converted exempt employees to non-exempt and started paying overtime will need to consider how to address those pay decisions given the ruling. From an employee relations perspective, it may be an issue to significantly reduce an employee’s salary that was raised to comply with the rule, or to stop paying overtime to employees reclassified as non-exempt, especially if the employee works substantial overtime.
Our firm is available to assist with questions concerning FLSA compliance. All covered employers must meet both the duties and salary test to qualify for the EAP exemption. Employers should periodically assess exempt positions as the duties and responsibilities evolve over time, to assure continued compliance with the FLSA’s strict exemption requirements.
Please contact Kevin Zwetsch, our employment law partner, if you have questions concerning your FLSA compliance, other pay practices, or the new ruling.
