Federal Court Strikes Down DOL’s Rule Raising Salary Threshold at Last Hour  

On October 30, 2024, one of our partners, Keystone Risk Management published a blog to remind you that a second increase to the minimum salary threshold for certain exempt employees was going into effect on January 1, 2025. That blog can be found here.

By way of short background, this increase was the result of the Department of Labor (DOL) issuing a final rule increasing the minimum salary threshold for certain “white collar” exemptions (executive, administrative and professional or “EAPs”). Effective July 1, 2024, the minimum salary threshold was raised from $684 per week ($35,568 per year) to $844 per week ($43,888 per year). Starting January 1, 2025, a second increase was to take effect raising the minimum salary for workers who qualify for one of the EAP exemptions to $1,128 per week ($58,656 annually). As explained in our previous blogs, failure to pay these exempt employees the new salary thresholds would result in them losing their exempt status and being owed overtime.

A significant change has occurred since we posted our previous blogs. On November 15, 2024, the U.S. District Court for the Eastern District of Texas struck down the DOL’s Rule on a nationwide basis because it concluded the DOL exceeded its authority. 

What does this mean?

Since this Rule was struck down on a nationwide basis, the increase in the threshold scheduled to become effective on January 1, 2025 will not go into effect. The court also struck down the July 1, 2024 increase that previously went into effect. Finally, the court held that the final rule’s automatic escalator provision, which would have increased the threshold every three years going forward, was also unlawful and will not take effect. In other words, the entire DOL rule has been declared unlawful and struck down.

What should you do now?

Since the DOL Rule has been declared unlawful, you do not need to increase the affected white collar exempt salaries to $1,128 per week to keep them exempt and from being owed overtime under federal law. As for employees whose salaries were adjusted to $844 per week to comply with the July 1, 2024 increase, it may not be wise to rescind that adjustment for a myriad of reasons. A rescission could affect compliance with applicable state law, employee morale, and be an administrative burden that outweighs any budgetary savings.

Don’t Forget State Law

As explained in our previous blogs, many states have minimum salaries that exceed the federal threshold which now has reverted back to $684 per week or $35,558 per year. Employers need to comply with both federal and applicable state salary threshold laws. If the state threshold is more than the federal threshold, your employee must be paid the minimum as set by your state to remain exempt. Otherwise, they would still be owed overtime.