POOL/PACT Human Resources (HR) is publishing this important Alert on the new exempt salary levels being overturned by a federal court. If you have any questions about how this may impact your employment policies or practices, please contact your HR Business Partner for more information.
On November 15, 2024, the U.S. District Court for the Eastern District of Texas ruled that the Department of Labor (DOL) exceeded its authority when it issued regulations that increased the minimum salary threshold for exempt employees earlier this year. The judge’s order not only invalidates the rule nationwide, it further overturns the increase that went into effect on July 1, 2024, setting the minimum salary threshold back to the 2019 level of $35,568 per year.
If you feel like you’re having déjà vu, you’re not. This really did happen before in 2016 when the same Texas federal district court stayed a proposed large increase in the salary threshold days before the increase was set to go into effect and was permanently blocked a few months later.
What happens next?
The DOL could appeal the decision, and if an appeal court reverses the judgment quickly, the next salary level increase could still go into effect on January 1, 2025. However, if the appeal is still ongoing after President-elect Trump takes office, the new administration may scrap the new threshold or propose different salary levels as it has before.
What employers should do now
Effective immediately, the 2019 salary threshold of $35,684 is back in effect. How to proceed depends on what was already implemented to comply with the new, now overturned, regulations:
- If exempt employees’ salaries were increased to meet the new salary threshold or if employees were informed of increases that would take effect in the near future, employers should work closely with legal counsel if they want to consider reversing changes. Keep in mind that reversing salaries could have a negative impact on morale.
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If employees were converted to hourly non-exempt due to the increased salary threshold, employers may be able to convert these employees back to exempt status after ensuring the position still meets the duties tests. (For more information, see POOL/PACT HR’s HR Briefing: Exempt Employees available to registered users at www.poolpact.com.)
As things are in flux right now, it may be wise to wait and see what happens with a potential appeal and how the new administration will respond before making any changes.
POOL/PACT HR will continue to track changes and update Members as needed. Please feel free to contact your HR Business Partner with any questions you may have.
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