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On November 15, 2024, a federal court vacated the 2024 DOL rule that increased the minimum salary requirements for certain exempt employees.

Background: Under the Fair Labor Standards Act (“FLSA”) employers must pay employees minimum wage for all hours worked and overtime pay when applicable. However, the FLSA provides some narrow “exemptions” for certain classifications of employees. These employees are “exempt” from hourly minimum wage and overtime pay, and are instead entitled to a minimum salary, as established and periodically updated by the Department of Labor (“DOL”). Some categories of such “exempt” employees include those who can be classified as Executive, Administrative, Professional (the three referred to as “EAP”), Outside Sales, Higher Education, and Computer, (“OHC”) as well as certain Highly Compensated Employees (“HCE”).

In April 2024, the DOL announced an increase to the weekly salary threshold for EAP, OHC and HCE exempt employees, to take effect in two steps effective on July 1, 2024, and January 1, 2025. Prior to July 1, 2024, the standard salary threshold for EAP and OHC employees was $684.00 per week. Beginning July 1, 2024, this minimum requirement increased to $844.00 per week and was to further increase to $1,128.00 per week as of January 1, 2025. The respective minimum salary for HCE increased on July 1, 2024, from $107,432.00 to $132,964.00, including at least $844.00 per week, and to $151,164.00, including at least $1,128.00 per week, as of January 1, 2025. The DOL also adopted a framework to automatically implement salary increases for EAP, OHC and HCE employees every three years.

Federal Ruling: Employers raised many challenges to the legality of the new DOL standards. On November 15, 2024, in a case called State of Texas v. United States Department of Labor, the United States District Court for the Eastern District of Texas found that the new rule is unlawful because it exceeds the authority the DOL has under the FLSA. Based on this finding, the court vacated the rule, effective immediately.

Implications: Despite being located in Texas, the federal court’s finding has immediate nationwide impact. By “vacating” the DOL rule, the court effectively reversed the July 2024 salary increase and nullified the salary increases scheduled for January 2025 and thereafter. The minimum salary for EAP, OHC, and HCE employees therefore reverts back to the pre-July standard of $684.00 per week for EAP and OHC exempt employees and $107,432.00 per year for HCE employees.

Employers must now decide whether to maintain any changes to employee salaries that had already been implemented. Such decisions inevitably will depend on the specific business impacts for each employer. There is also a possibility that the DOL challenges the court’s decision and that higher courts reimplement the rule. Such challenges are (historically) less likely to be priorities under the Trump administration, but there is no foolproof way to predict how these challenges may play out in court. For now, employers across the country can rely on the finding that the DOL rule was unlawful and was therefore set aside by the court.

Employers with further questions about the implications of this federal ruling or any other employment questions should contact their Moss & Barnett attorneys for assistance, including Moss & Barnett employment law attorneys:

Jodi L. Johnson
Jodi.Johnson@lawmoss.com
612-877-5256

Craig A. Brandt
Craig.Brandt@lawmoss.com
612-877-5360

Leah E. DeGrazia
Leah.DeGrazia@lawmoss.com
612-877-5326