The U.S. District Court for the Eastern District of Texas recently struck down the Department of Labor’s (“DOL”) 2024 rule raising exempt salary thresholds under the Fair Labor Standards Act (“FLSA”).

By way of brief background, the 2024 DOL rule raised the minimum salary for overtime exemptions for executive, administrative, and professional (“EAP”) employees and highly compensated employees (“HCE”). Under the DOL rule, the salary minimums changed as follows:

• On July 1, 2024, the minimum salary for the EAP exemption increased to $844 per week.
• On January 1, 2025, the minimum salary for the EAP exemption was set to increase to $1,128 per week.
• On July 1, 2024, the minimum salary for the HCE exemption increased to $132,964 per year.
• On January 1, 2025, the minimum salary for the HCE exemption was set to increase to $151,164 per year.

The DOL rule also established automatic increases to the salary thresholds every three years, starting July 1, 2027.

In the Texas decision, the court overturned the DOL rule on the grounds that it exceeded the DOL’s authority and effectively eliminated the duties portion of the analysis of whether a worker is appropriately classified as exempt from overtime.

The impact of this decision is that the July 2024 increases were rendered void, and the increases scheduled for January 1, 2025 will not go into effect. As a result, the statutory minimums from the 2019 DOL Rule have been reinstated. This means that the minimum salary for the EAP exemption is $684 per week and the minimum salary for the HCE exemption is $107,432 per year. Employers should note that many states have salary thresholds that are higher than the FLSA thresholds and must abide by those salary levels when determining whether to classify an employee as exempt from overtime. 

This decision may be appealed by the DOL to the Fifth Circuit Court of Appeals, but the determination of whether to do so will likely be decided by the next presidential administration. 

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If you have questions or would like additional information, please contact our Labor & Employment attorneys or the primary EGS attorney with whom you work.