Recently, the U.S. District Court for the Eastern District of Texas overturned the U.S. Department of Labor’s (DOL’s)overtime rule that increased the salary threshold employers must pay to certain categories of employees for them to be exempt from the overtime requirements of the Fair Labor Standards Act (FLSA).
In April 2024, the DOL announced its final rule increasing the minimum salary required for executive, administrative and professional employee exemptions (EAP or white-collar exemptions).The final rule also included additional increases for the highly compensated employee (HCE) exemption. The increases were to be implemented in the following ways:
- On July 1, 2024, the earning level threshold for the EAP exemption was to change from its current level of $684 per week ($35,568 annually) to $844 per week ($43,888 annually). The minimum salary needed for an employee to meet the HCE exemption was $107,432 per year, and on July 1, 2024, that amount was to go to $132,964 per year.
- On January 1, 2025, the earning level threshold for the EAP exemption was to set to go to $1,128 per week ($58,656 annually), and the HCE exemption was set to increase to $151,164 per year.
- For both the EAP and HCE exemptions, the final rule called for automatic salary increases every three years starting on July 1, 2027.
The U.S. District Court found that the DOL exceeded its rulemaking authority and overturned all three increases for the entire country. This means that the July 1, 2024, exemption increase is nullified, the January 1, 2025, exemption increase won’t go into effect and the automatic increases also won’t take effect.
If employers have already made adjustments to their employees’ salaries or exempt statuses based on the July 1, 2024, changes that are now overturned, consideration should be given to having a discussion with legal counsel as to what the best next steps are.
Another item to keep in mind before putting into place decisions that would roll back the changes is to check the state wages and hour laws too. Some states already have salary thresholds that exceed the pre-DOL increase amounts.
If you have any questions regarding the DOL’s overtime changes being overturned and how this development may impact your business, Creative Planning Business Services can help. We offer a range of services from payroll to outsourced accounting and can help your business navigate new legal changes so that you can stay compliant and focus on other business matters. Contact us today to learn more about our services.
