Court Strikes Down DOL Rule Set to Increase the Salary Threshold for Many FLSA Exempt Employees

On November 15, 2024, a U.S. federal district court issued the much-anticipated decision in Texas v. U.S. Department of Labor, addressing the Biden administration’s proposed salary threshold increases for certain exempt employees under the Fair Labor Standards Act (“FLSA”). In a relief for employers, the judge granted summary judgment in favor of the State of Texas and the Plano Chamber of Commerce (collectively “Plaintiffs”), effectively killing the salary increases nationwide.

Background

Employees covered by the FLSA’s “white collar” exemptions are not entitled to overtime pay under federal law when they work more than 40 hours in a workweek. However, for any of those exemptions to apply, employees must perform certain duties and earn at least a set minimum guaranteed salary. As we previously reported here, in April 2024, the U.S Department of Labor (“DOL”) proposed a new rule that would increase the salary threshold for the white collar exemptions. The new rule raised the salary requirement in two stages. The first stage took place on July 1, 2024, and increased the threshold from $684.00 per week ($35,568.00 per year) to $844.00 per week ($43,888.00 per year). The second stage was set to take place on January 1, 2025, and would have increased the salary threshold to $1,128.00 per week ($58,656.00 per year). Thereafter, automatic updates would occur every three years.

Texas v. U.S. Department of Labor

The State of Texas and certain business groups filed a lawsuit in federal court challenging the new rule immediately. As we reported here, in June 2024, the court granted a preliminary injunction stopping the initial July 1, 2024, increase from taking place, but only as to those businesses in the State of Texas. On November 15, 2024, the court issued summary judgment in favor of Plaintiffs, holding that the DOL exceeded its statutory authority by issuing the new rule and striking the salary threshold increases altogether nationwide. The DOL can appeal the decision to the Fifth Circuit Court of Appeals but, with the recent election, the change in administrations likely means that an appeal would eventually be withdrawn and/or that the rule will be discontinued.

Implications for Employers

While there is still uncertainty about how the rule will play out, at least for now, the salary threshold for the white-collar exemptions has returned to $684.00 per week ($35,568.00 per year). The change that took place on July 1, 2024, to $844.00 per week ($43,888.00 per year) is no longer legally required under federal law.  However, several states impose higher salary thresholds under state law. Moreover, it may be difficult from a human relations standpoint to roll back prior increases. If you have any questions about the decision or any changes to your workforce compensation strategy, please contact one of Honigman’s Labor and Employment attorneys.