The Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (“FLSA”), requires covered employers to pay their employees who work in excess of forty (40) hours in any work week overtime pay at the rate of one and one-half times the employee’s regular pay. However, the FLSA contains several exemptions, including one for executive, administrative, and professional employees (“EAP”). In order to qualify for the EAP Exemption, an employee must meet the “salary level” test by earning at least a specified minimum salary and also must meet the “duties” test by performing primarily a higher level of duties in executive, administrative, and professional positions.
Earlier this year, the Department of Labor enacted a new rule that raised the salary threshold for the EAP exemption in three stages, with each change increasing the minimum salary level that an EAP employee must meet in order to remain exempt under the FLSA. The first change took effect on July 1, 2024 and increased the minimum salary level from $684 per week ($35,568 annually) to $844 per week ($43,888 annually). The next change was scheduled to take effect on January 1, 2025, which would have increased the minimum salary level from $844 per week ($43,888 annually) to $1,128 per week ($56,656 annually). Thereafter, the salary threshold would have automatically increased every three years based upon contemporary earnings data.
Not surprisingly, the 2024 Rule has been the subject of several legal challenges this year across the country, and the courts have not been consistent in their preliminary injunctive relief rulings, leaving much uncertainty (and anxiety for employers) as to the fate of the 2024 Rule.
Fortunately for employers, on November 15, 2024, the United States District Court for the Eastern District of Texas issued a final judgment on the merits in State of Texas v. U.S. Dept. of Labor et al., Civil No. 4:24-CV-468-SDJ (E.D. Texas Nov. 15, 2024), finding that the DOL exceeded its authority in promulgating the 2024 Rule. The court vacated and struck down the Rule, thereby rendering it unenforceable on a nationwide basis. Importantly, the court’s ruling also invalidated the July 2024 increase in the salary threshold, such that the salary threshold for the EAP Exemption has now reverted back to the pre-July 2024 level of $684 per week (or $35,568 annually).
The Texas court remanded the matter back to the DOL for further consideration in light of the court’s opinion. However, in light of the upcoming change in administration, including the anticipated change in leadership at the DOL, it is likely that any proposed increase to the salary threshold for the EAP Exemption will be dead on arrival upon remand to the DOL.
For more information, please contact Theresa Phelps who is a member of our Firm’s labor and employment group.