A federal court has overturned the U.S. Department of Labor’s (DOL) rule that significantly raised salary thresholds for white-collar exemptions. On November 15, 2024, the U.S. District Court for the Eastern District of Texas invalidated the DOL’s final rule, reinstating the previous thresholds of $684 per week ($35,568 annually) for white-collar employees and $107,432 annually for highly compensated employees.
What Was the Rule?
Earlier this year, on April 23, 2024, the DOL announced a final rule to raise the salary thresholds for federal minimum wage and overtime exemptions. The changes were phased: on July 1, 2024, the thresholds increased to $43,888 annually for white-collar exemptions and $132,964 for highly compensated employees. Another increase was scheduled for January 1, 2025, setting the thresholds at $58,656 and $151,164, respectively.
What Did the Court Decide?
In a detailed 62-page ruling, the court determined that the DOL’s significant increase to the thresholds effectively transformed the exemption criteria into a "salary-only" test, sidelining the traditional balance between salary and job responsibilities. The court deemed this shift inconsistent with the Federal Labor Standards Act (FLSA) and an overextension of the DOL’s regulatory authority. Consequently, the court invalidated the rule and reinstated the prior thresholds.
What Does This Mean for Employers?
For now, employers no longer need to prepare for the January 2025 increase, and the changes implemented in July 2024 are no longer in effect. However, this ruling presents challenges for employers who already raised salaries or reclassified employees to meet the July thresholds. Employees who were made non-exempt under the July rule may now qualify as exempt again.
Employers should carefully weigh the impact on employee morale before reversing salary increases tied to the now-invalidated thresholds. Any sudden changes could harm workplace culture and employee satisfaction.
What’s Next?
The DOL may appeal this decision, though such an appeal faces an uphill battle. If overturned by a higher court, the increased thresholds could be reinstated. Alternatively, the administration could abandon the rule entirely and opt not to appeal.
As the situation develops, staying informed will be crucial. Updates will be shared as new information becomes available.
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