On Friday, November 15, 2024, Judge Sean Jordan of the United States District Court for the Eastern District of Texas granted summary judgment in favor of the plaintiffs in the case of State of Texas, Plano Chamber of Commerce, et al. v. U.S. Department of Labor, et al., Case No. 4:24-CV-468-SDJ. In doing so, Judge Jordan set aside the Department of Labor's (DOL) April 2024 rule which would have increased the minimum salary level for executive, administrative, and professional overtime exempt workers (sometimes referred to as the "white collar" exemptions) from $684 per week ($35,568 per year) to $844 per week ($43,888 per year) effective July 1, 2024, and then again to $1,128 per week ($58,656 per year) effective January 1, 2025. The new salary rule would also have increased the Highly Compensated Employee (HCE) (short test) minimum from $107,432 per year to $132,964 on July 1, 2024, and then again to $151,164 per year on January 1, 2025. The rule would have impacted an estimated four million workers by causing them to become overtime eligible unless their salaries were increased to meet the new federal minimums.
Judge Jordan conducted an extensive review of the history of the minimum salary rule for non-exempt workers, which is not specifically included in the Fair Labor Standards Act text. This included evaluating the 2016 proposed minimum salary increase under the Obama administration, which had been judicially struck down. The Court recognized that the Fifth Circuit Court of Appeals earlier this year in Mayfield v. DOL, 117 F.4th 611 (5th Cir. 2024), found that the DOL could, within its statutory authority, utilize a salary test as a component of the white collar exemptions because a salary level "may be a reasonable proxy" for exempt work. But noting that the Mayfield court also recognized that the DOL's authority "is not unbounded," Judge Jordan concluded that the 2024 rule was "an unlawful exercise of agency power." In essence, the Court found that the 2024 salary level increases were so substantial that they likely would undermine the exempt status of many workers who otherwise clearly perform the requisite duties to qualify for the exemption. Accordingly, the Court set aside the rule, meaning that it no longer has any legal effect.
At this point, the DOL has 30 days to file a notice of appeal to the Fifth Circuit Court of Appeals. Even if an appeal is taken, however, it is unclear whether the incoming Trump administration will seek to enforce the rule in its current form, issue a new rule with a lower salary threshold (as the prior Trump administration did in 2019 after the 2016 increase was set aside), or potentially withdraw the rule altogether.
For the time being, the July 2024 and January 2025 salary increases have no legal effect. The current enforceable salary minimum for exempt administrative, and professional employees is $684 per week ($35,568 per year) and the salary minimum for the HCE exemption is $107,432 per year. Employers should make determinations regarding employee exemptions using these figures, while continuing to monitor developments in this area.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
