Federal Court Strikes Down Overtime Rule

In a pivotal decision that affects businesses across the United States, the U.S. District Court for the Eastern District of Texas has struck down the Department of Labor’s (DOL) 2024 final rule on “white-collar” overtime exemptions. This ruling reverts the salary threshold to pre-July 2024 levels, having significant implications for entrepreneurs, business leaders, and employers nationwide. 

Understanding the Court’s Ruling 

On November 15, 2024, the Court ruled against the DOL's proposed increases, which were set to roll out in two phases. The initial phase had already increased the minimum salary level to $844/week ($43,888 annually) as of July 1, 2024, with a planned increase to $1,128/week ($58,656 annually) by January 1, 2025. Additionally, the rule sought to raise the highly compensated employee threshold from $132,964 to $151,164. However, the Court declared these changes unlawful, emphasizing that the DOL had overstepped its authority by prioritizing salary levels over job duties. 

What This Means for Your Business 

The federal salary threshold for “white-collar” overtime exemption returns to $674/week ($35,568 annually), and the highly compensated employee threshold reverts to $107,432. These thresholds will not increase on January 1, 2025, providing temporary clarity for employers. While this decision may feel like a win for businesses, it’s important to stay informed about potential changes. The DOL could appeal the decision, but given the political landscape, such an appeal seems unlikely under the incoming Trump administration. 

Next Steps for Employers 

If you previously adjusted the salaries or exemption status of your employees based on the DOL’s rule, you should consider the business implications and consult with counsel before considering whether to rescind those changes going forward. 

Based on the Court’s Decision, you do not have to adjust your employees’ salaries or exemption status on Jan. 1, 2025. 

Conclusion 

While the Court’s decision is a significant win for employers and businesses with salaried employees, it is important to understand that the decision is not completely final. Again, the DOL has the right to appeal the decision to a higher court. As such, it would be prudent for you to continue to monitor the DOL’s stance on the rule. 

It is also important to note that the Court’s decision only applies to the federal salary thresholds and does not affect any individual state’s separately implemented salary thresholds that may exceed the FLSA’s threshold.  

Disclaimer: The above information is provided for general guidance purposes and is not intended to be legal advice. Compliance determinations must be made on a case-by-case basis and depend on various factors. You should consult a licensed attorney with employment law experience to determine specific actions.