On November 15, 2024, Judge Sean D. Jordan of the United States District Court for the Eastern District of Texas ruled in favor of the challengers of the DOL’s rule, holding that the DOL went beyond its statutory authority by significantly raising the salary threshold. Judge Jordan found that the DOL set the salary threshold so high for exempt employees, that the rest of the analysis used to determine exempt status was irrelevant. Judge Jordan stated that the DOL’s rule effectively made salary the determining factor. Judge Jordan’s ruling applies nationwide to all employers covered by the Fair Labor Standards Act.
The FLSA mandates minimum wage and overtime pay but exempts certain white-collar workers. Generally, such employees are exempt from overtime pay if they are paid on a salary basis above a certain amount per week and work in a “bona fide executive, administrative, or professional capacity.” Through its regulations, the DOL sets the minimum salary threshold for the exemptions.
As we have previously covered, the DOL sought to change the salary threshold in three phases. The first phase, which took effect in July 2024, increased the salary threshold from $684 to $844 per week. The second phase of the rule was to take effect in January 2025, and would have increased the salary threshold from $844 to $1,128 per week. The third phase was intended to automatically increase the salary threshold every three years starting in 2027.
The State of Texas and business groups challenged the rule, arguing that it improperly emphasizes salary over job duties, violating the FLSA’s statutory text. In the November 15 opinion, Judge Jordan sided with the State of Texas and various business groups concluding that the DOL’s action overstepped its authority. Judge Jordan vacated the rule and remanded it to the DOL for “further consideration.” In doing so, the Court reversed the July 2024 salary increase that has already taken effect returning the mandatory minimum salary threshold to the prior level of $684 per week.
The DOL has appealed this ruling to the Fifth Circuit Court of Appeals, but its appeal is unlikely to conclude before the Trump Administration and incoming new DOL leadership take power.
Employers who increased employee salary levels or adjusted exemption status to comply with the now-invalidated rule may reconsider such actions going forward. Employers cannot recover any salary increase already paid but may reduce salaries prospectively while still maintaining exempt status. Before taking action, employers should consider workplace repercussions, consult with counsel and recognize that several states already impose higher salary requirements, including Alaska, California, Colorado, Maine, New York, and Washington. K|W|W will continue to monitor FLSA developments. At K|W|W, your workforce is our priority.