On November 15, 2024, the U.S. Department of Labor’s 2024 Fair Labor Standards Act (“FLSA”) Salary Basis Rule (“2024 Rule”) was vacated by the United States District Court for the Eastern District of Texas. The 2024 Rule, which was finalized by the DOL back in April and became effective on July 1, 2024, raised the salary level to qualify for exempt from overtime status for executive, administrative, and professional employees under the FLSA to $43,888 annually ($844/week). With the Texas court’s decision, the 2024 Rule is blocked nationwide and will not go into effect, meaning that the FLSA’s exempt status salary level will revert to its pre-July 2024 level of $35,568 annually ($684/week).
What Was the 2024 Rule?
The 2024 Rule would have brought about significant increases in the salary level required for exempt from overtime status under the FLSA. In addition to the increase on July 1, 2024, the 2024 Rule also would have brought additional increases, with the salary level required for exempt from overtime status rising to $56,656 annually ($1,128/week) on January 1, 2025, and regular salary level adjustments by the DOL every three years, to reflect employee earnings data, beginning on July 1, 2027.
Appeal Options for the DOL?
The DOL has the option to appeal the Texas court’s decision to the U.S. Court of Appeals for the Fifth Circuit and may do so. However, even if an appeal is filed, there is only a remote chance that the Fifth Circuit would intervene in the short time that the current administration has left in office, and the Trump administration is highly unlikely to provide support to an appeal filed by the Biden administration.
Next Steps for Employers?
What does the Texas court decision to block the 2024 Rule mean for employers? The salary level required for exempt from overtime status for executive, administrative, professional employees will revert to its pre-2024 Rule level of $35,568 annually ($684/week), and the January 1, 2025, salary level increase will not go into effect. And while it is conceivable that employers who raised employee salaries to comply with the 2024 Rule’s July 1 increase could try to recoup some or all that increase, the potential negative workforce consequences of doing so would seem to outweigh any employer cost savings. Employers who have not yet made salary changes in anticipation of the 2024 Rule’s January 1, 2025, increase may want to put those plans on hold for now.
Bean, Kinney & Korman’s employment law practice group works proactively with employers of all sizes, in Virginia, Maryland, and the District of Columbia, to craft a full range of employment policies and documents to meet the compliance challenges of the FLSA, and all applicable federal, state, and local laws. If you have questions about the FLSA, or need assistance with your company’s workforce policies or forms, please contact Doug Taylor at (703) 525-4000 or rdougtaylor@beankinney.com, or your current Bean, Kinney & Korman attorney.
This article is for informational purposes only and does not contain or convey legal advice. Consult a lawyer. Any views or opinions expressed herein are those of the authors and are not necessarily the views of any client.