On Nov. 15, 2024, a federal judge in Texas vacated the U.S. Department of Labor’s rule that would have increased the salary threshold for white-collar exempt employees under the Fair Labor Standards Act (FLSA). Texas v. United States Dep’t of Lab., No. 4:24-CV-468-SDJ (E.D. Tex.). As a result, the 2019 Department of Labor rule setting a lower salary threshold remains in effect.
Under the FLSA, employees are entitled to overtime pay unless they meet the requirements for a statutory exemption. The most common exemptions are the so-called white-collar or “AEP” exemptions for executive, administrative and professional employees. To qualify under the white-collar exemptions, employees must satisfy three tests: the salary-basis test, the salary-level test and the duties test.
In April 2024, the U.S. Department of Labor (DOL) published a new rule that increased the minimum salary required to qualify for the white-collar exemptions. The DOL’s pre-existing 2019 rule required a minimum salary threshold of at least $35,568 annually (or $684 per week). The rule’s first stage went into effect earlier this year on July 1, 2024, increasing the annual salary threshold to $43,888 (or $844 per week). The rule also scheduled a larger annual salary increase for Jan. 1, 2025, to $58,656 (or $1,128 per week). Employees making less than these threshold amounts are not exempt from overtime requirements under the white-collar exemptions, even if they meet the salary-basis and duties tests.
One of the most striking aspects of the Nov. 15, 2024, ruling was the district court’s reliance on a controlling appellate court’s holding that the DOL has the authority to set minimum salary thresholds. Two months ago, the employer-friendly 5th Circuit U.S. Court of Appeals upheld the DOL’s 2019 escalation of the salary threshold, ruling that Congress had “explicitly delegated authority to define and delimit the terms of the [e]xemption.” Mayfield v. United States Dep’t of Lab., 117 F.4th 611 (5th Cir. 2024). Acknowledging the Mayfield precedent, the district court still struck down the DOL’s 2024 rule citing Mayfield that the DOL may “impose some limitations on” the scope of the terms identified in the white-collar exemptions, but it cannot “enact rules that replace or swallow the meaning those terms have.”
The district court reasoned that the DOL’s 2024 rule was such a dramatic increase in the salary threshold that it disrupted the balance of the other factors, causing salary level to become the dominant consideration. The district court concluded that, while the DOL may use a minimum salary threshold, it must keep the threshold low to screen out employees who do not meet the duties requirements that are outlined in the white-collar exemptions.
So, what does this decision mean for employers?
The district court’s decision applies nationwide and therefore reverts the salary threshold back to $35,568—the level set under the 2019 rule—reversing the increase that went into effect in summer 2024. Given the post-election political environment, this decision seems likely to stand. While the DOL can appeal this district court’s decision, it is unlikely to do so as the department will soon undergo a political shift with the new and presumably more employer-friendly administration.
Despite these changes to the federal salary threshold, multistate employers should continue to adhere to state laws that impose stricter guidelines than federally mandated. For example, in Colorado the salary threshold for white-collar exempt employees is $55,000. Other states and localities—including Alaska, California, New York and Washington—mandate their own salary requirements for white-collar exemptions.
Many employers have already prepared for and implemented the 2024 rule’s directives, either by increasing pay for its white-collar workers or reclassifying those employees as non-exempt. Businesses that consider rolling back those adjustments should be sure that any changes will be able to withstand any increased scrutiny by federal and state agencies.
If you have any questions concerning the classification of your employees, please reach out to the employment attorneys at Brownstein Hyatt Farber Schreck, LLP.
This document is intended to provide you with general information regarding a recent federal court ruling vacating the DOL's rule increasing salary thresholds for white-collar exempt employees. The contents of this document are not intended to provide specific legal advice. If you have any questions about the contents of this document or if you need legal advice as to an issue, please contact the attorneys listed or your regular Brownstein Hyatt Farber Schreck, LLP attorney. This communication may be considered advertising in some jurisdictions. The information in this article is accurate as of the publication date. Because the law in this area is changing rapidly, and insights are not automatically updated, continued accuracy cannot be guaranteed.