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DOL Rule Increasing Salary Threshold For FLSA Exemptions Is Vacated Nationwide
On November 15, 2024, United States District Court Judge Sean D. Jordan for the Eastern District of Texas vacated the April 23, 2024, Department of Labor (DOL) Rule increasing the minimum salary level required to maintain exempt status under the Fair Labor Standards Act (FLSA). Judge Jordan’s decision in State of Texas v. U.S. Dept. of Labor is effective nationwide. Therefore, the minimum salary level reverts back to the pre-2024 Rule of $684 per week or $35,568 annually.
To qualify for the executive, administrative or professional (EAP) exemptions from the minimum wage and overtime provisions of the FLSA, employees must be paid on a salary basis, be paid at or above a minimum salary level and meet the duties test associated with the particular exemption. The minimum salary level is set by the DOL and modified periodically by regulation. The DOL’s 2024 Rule raised the minimum salary level required to maintain exempt status in two stages. The first stage increase raised the minimum salary level to $844 per week ($43,888 annually) on July 1, 2024. The second stage increase raised the minimum salary level to $1,128 per week ($58,656 annually) on January 1, 2025. The July 1, 2024, increase set the minimum salary level at the 20th percentile of weekly earnings of full-time, salaried workers in the South and/or retail industry nationally based on Bureau of Labor Statistics (BLS) data, while the January 1, 2025, increase utilized the 35thpercentileoftheweekly earnings of full-time, salaried workers in the lowest-wage Census Region and/or retail industry nationally. The 2024 Rule also included automatic increases to minimum salary levels every three years based on contemporaneousearningsdatastartingJuly7,2027.
In granting summary judgment to the State of Texas and numerous business associations that challenged the 2024 Rule, Judge Jordan found the DOL exceeded its authority delegated by Congress. More specifically, while the DOL had the authority to “define and delimit” the terms of the EAP exemptions through regulations, the 2024 Rule exceeded that authority by effectively eliminating consideration of the duties test in favor of making the salary level the determinative factor. Judge Jordan reviewed historical salary level increases and noted the 2024 Rule represented a departure from the DOL’s longstanding policy of setting a minimum salary level that did not disqualify a substantial number of employees that met the EAP duties test from exempt status. Judge Jordan cited the DOL’s estimates that the 2024 Rule rendered over four million employees non-exempt who were previously exempt – with no change in duties. Finally, Judge Jordan held the DOL had no legal basis to create an automatic indexing mechanism to increase salary levels in the future without going through the notice and comment process. The DOL itself acknowledged it did not possess this authority when it issued a salary level increase in 2004. Therefore, Judge Jordan “nullified and revoked” the illegal agency action.
Should you have any questions regarding this decision, please contact Mr. Yates.
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Disclaimer: This alert has been prepared by Eastman & Smith Ltd. for informational purposes only and should not be considered legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney/client relationship.