By: Ross E. Simpson
A Texas federal court recently vacated a Final Rule issued by the U.S. Department of Labor (DOL) that increased the salary threshold for employees classified under the “white-collar” exemptions to the Fair Labor Standards Act (FLSA). Historically, an employee is considered exempt from federal minimum wage and overtime requirements if: (1) the employee’s primary job duties involve executive, administrative, or professional duties; (2) the employee is paid a predetermined salary; and (3) the salary exceeds a minimum threshold set by the DOL. On July 1, 2024, the Final Rule raised the salary threshold for exempt employees from $684 per week ($35,568 annualized) to $844 per week ($43,888 annualized). The Final Rule would have increased the salary threshold to $1,128 per week ($58,656 annualized) on January 1, 2025, with further increases occurring automatically every three years based on available wage data.
As a result of the federal court’s decision, the DOL cannot enforce any part of the Final Rule, and the salary threshold for white-collar exemptions has returned to $684 per week ($35,568 annualized). Salaried employees earning less than this amount might be subject to the FLSA’s minimum wage and overtime requirements unless they meet other criteria for exemption.
For employers, this decision brings a sense of relief. The DOL could appeal the court’s decision or attempt to modify the rule, but neither seems unlikely the Trump Administration. And if it did, any appeal would be brought before the Fifth Circuit Court of Appeals, which is known as one of the most employer-friendly federal appeals courts.
Whether you have already increased exempt employees’ salaries, you may consider whether those adjustments still serve a valid business purpose. If you have not yet made any changes to salaries but were planning to do so to ensure compliance, you should work with competent employment counsel to assess your current workforce classifications by reviewing the exempt and non-exempt classifications of employees to ensure that they are properly categorized under the FLSA. Even with the salary threshold restored to $35,568 annually, the duties tests for the white-collar exemption remain in place, and it is crucial that your exempt employees meet all criteria for exemption. You should also ensure that your employee handbook and written policies remain compliant with the FLSA and other labor and employment laws and regulations.
If you have questions concerning the legal status of the Final Rule or any other employment-related laws or regulations, please contact one of our employment attorneys by calling (501) 375-9131.