On Friday, November 15th, the District Court for the Eastern District of Texas struck down the Department of Labor’s 2024 rule increasing the salary basis for both the white collar – executive, administrative, and professional – and highly compensated employee exemptions along with the automatic increases included within the rule. Employers nationwide are now free to ignore the DOL rule and maintain the white-collar salary basis at the pre-July 1, 2024, level of $35,766 per year ($684 per week).
Back in April, the DOL issued a final rule raising the white-collar exemption salary basis test in two phases – to $43,888 per year ($844 per week) as of July 1, 2024, and to $58,656 per year ($1,128 per week) as of January 1, 2025. The highly compensated individual exemption threshold was also set to increase – to $132,964 per year on July 1st, and to $151,164 per year on January 1st. The rule included a provision to automatically increase the salary basis every three years going forward.
The court held that the DOL’s approach had gone beyond its authority under the Fair Labor Standards Act, because the text of the FLSA focuses on an employee’s duties not upon his or her salary. By setting the salary thresholds as high as it had, the court determined that the agency had, in effect, created a “salary only” test, ignoring the focus of the statutory text. The court further held that the anticipated automatic increases violated the regulatory procedures required by the Fair Labor Standards Act and Administrative Procedure Act.
While employers may now ignore the DOL rule, employers should keep in mind that some states – including Alaska, California, Colorado, Maine, New York, and Washington – and a number of localities have their own salary thresholds for these exemptions that exceed the now-current FLSA threshold.
Although the DOL may appeal the lower court’s decision to the Fifth Circuit Court of Appeals, many anticipate that the Trump administration would be likely to abandon the appeal and allow the lower court decision to stand.
If you have questions regarding the court’s decision and how it may impact your business, please contact Michael W. Bowling or another member of the Labor & Employment Practice Group.