A federal judge in Texas invalidated the United States Department of Labor’s (DOL) rule that raised the minimum salary levels under the Fair Labor Standards Act (FLSA) “white collar” exemptions on November 15, 2024.  The DOL had proposed an increase in the salary level, in order to be classified as exempt, to $1,128.00 per week ($58,656 per year) effective January 1, 2025.  This proposal WILL NOT go into effect.  The U.S. District Court for the Eastern District of Texas also struck down the July 1, 2024 increase to $844.00 per week ($43,888 per year).

• The July 1, 2024 increase is nullified, the salary threshold will revert to $684 per week ($35,568 per year).  Employers may continue to classify white-collar employees as exempt as long as they satisfy the applicable duties test and earn at least $35,686 annually ($107,432 for Highly Compensated Employees).
• The court found that the DOL exceeded its authority by setting salary thresholds that potentially overshadow the duties test for exempt status, which remains central to the FLSA’s overtime exemptions.  The court also stated the final rule’s automatic “escalator” provision, which would have increased the threshold every three years going forward, was also unlawful.

Next Steps?

• Employers who previously adjusted salaries or the exemption status of employees to meet the July 1, 2024 salary level might choose to maintain these adjustments to avoid disruptions.  Reverting back to previous salaries could impact employee morale and/or may violate state laws in some jurisdictions.  Employers may want to wait and see what potential appeals come about or how the new administration under Trump will respond before making any major changes.
• This is a great opportunity for employers to review their exemption classifications to ensure compliance with both the salary threshold and duties test.
• Employers need to be aware of state salary threshold requirements that are higher than the Federal requirement.