A federal district court in Texas on Nov. 15, 2024, issued an order vacating the U.S. Department of Labor (DOL) rule that had raised the salary threshold levels for the white-collar overtime exemptions. The rule increased the minimum salary threshold to qualify for the executive, administrative and professional exemptions to $844 per week ($43,888 annualized) in July 2024, and the DOL was set to raise it again to $1,128 per week ($58,656) on Jan. 1, 2025. Following this decision, the July 2024 minimum is no longer effective, and the Jan. 1, 2025, increase will not occur. (See previous Holland & Knight alert, "Department of Labor Raises Minimum Compensation Levels for FLSA Overtime Requirement," April 23, 2024.) Instead, the minimum salary level will revert to the amount of $684 per week ($35,568 annualized).
The court's decision applies nationwide and vacates the new DOL rule as to all employers. The court, in its 62-page opinion, determined that the rule exceeded the DOL's statutory authority by effectively eliminating consideration of an employee's duties in favor of a predominately salary-based test. The court conceded that the DOL may use salary as part of its authority to define and delimit the exemptions, but that the salary level cannot be so high as to displace the duties test for the exemptions. This same federal court (though not the same judge) in 2016 overturned an Obama Administration rule that had been set to similarly raise the minimum salary requirements.
The ruling also vacated the increase to the highly compensated employee exemption, which had been set to rise to $151,164 per year on Jan. 1, 2025, and reverts it back to a minimum of $107,432 per year. Further, the decision vacated the automatic annual raises to the minimum levels that were set to begin in 2027. The ruling does not impact any different state-law minimum-salary requirements, which continue to apply to employees in those states.
The DOL is likely to appeal the ruling, and the court of appeals could issue a stay of the district court's order, keeping the rule in effect while it considers the appeal. There is also, however, some likelihood that the incoming Trump Administration would move to withdraw the appeal or to stay any appellate proceedings.
In short, at the current moment, the minimum salary levels have reverted back to the pre-2024 levels, but employers should continue to follow this topic for any developments that may reinstate the increased minimums.
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