$44K and $59K FLSA Thresholds Struck Down by Texas District Court
November 18, 2024
- Katherine Busbee
The U.S. District Court for the Eastern District of Texas has vacated and set aside the Department of Labor’s rule raising the salary threshold for exempt employees under the Fair Labor Standards Act (FLSA). The decision strikes down both the $44K salary threshold that took effect on July 1, 2024, and the $59K salary threshold that was set to take effect on January 1, 2025. The Department of Labor may appeal the ruling, but for now (and likely continuing under the incoming Trump administration), the raised salary thresholds are nullified.
Background
Under the FLSA, employees must meet certain salary and duties requirements (see the duties test for executive, administrative, or professional employees) to be exempt from the FLSA’s overtime pay requirements. Employees may also qualify as exempt if they meet the salary threshold for highly compensated employees and the related duties test. If an employee does not qualify as exempt, the employee must be paid time and a half for any hours worked over 40 hours in a workweek.
In April 2024, the Department of Labor (DOL) finalized a rule to increase the salary threshold for exempt workers in two stages:
What if my company already complied with the first increase or notified employees of the January 1, 2025 increase?
If your company had employees who moved from exempt to non-exempt status due to the July 1 increase and you notified those employees of their change in status and any timekeeping requirements they were subject to, you can now notify them of the rule-change and inform them that they will once again be exempt under the FLSA. When sending this notice, you will also want to specify whether they will continue to be subject to any timekeeping requirements typically applicable to non-exempt employees. Similarly, if you notified employees of the upcoming January 1, 2025, change, you will need to send a second notice stating that the court has vacated the rule and that their status will not change due to the rule. If you need help drafting these notices, please reach out to a member of our employment law team.
If you raised employees’ salaries due to either of the salary increases, you should carefully consider whether it is worth the potential impact on employee morale to revert their wages. Many states also have laws requiring advance written notice before decreasing an employee’s pay. For example, in South Carolina, employers must provide 7 days' written notice before any decrease in pay. Please reach out to a member of our Employment Law team if you are considering reverting wages.
Under the FLSA, employees must meet certain salary and duties requirements (see the duties test for executive, administrative, or professional employees) to be exempt from the FLSA’s overtime pay requirements. Employees may also qualify as exempt if they meet the salary threshold for highly compensated employees and the related duties test. If an employee does not qualify as exempt, the employee must be paid time and a half for any hours worked over 40 hours in a workweek.
In April 2024, the Department of Labor (DOL) finalized a rule to increase the salary threshold for exempt workers in two stages:
- Effective July 1, 2024: The annual salary threshold for exempt executive, administrative, or professional employees would increase from $35,568 to $43,888 (or $844 per week), and the annual salary threshold for exempt highly compensated employees would increase from $107,432 to $132,964.
- Effective January 1, 2025: The annual salary threshold for exempt executive, administrative, or professional employees was set to further increase from $43,888 to $58,656 (or $1,128 per week), and the annual salary threshold for highly compensated employees was set to increase from $132,964 to $151,164.
- Beginning July 1, 2027, and every three years thereafter, the salary thresholds were to be updated to reflect current earnings data.
What if my company already complied with the first increase or notified employees of the January 1, 2025 increase?
If your company had employees who moved from exempt to non-exempt status due to the July 1 increase and you notified those employees of their change in status and any timekeeping requirements they were subject to, you can now notify them of the rule-change and inform them that they will once again be exempt under the FLSA. When sending this notice, you will also want to specify whether they will continue to be subject to any timekeeping requirements typically applicable to non-exempt employees. Similarly, if you notified employees of the upcoming January 1, 2025, change, you will need to send a second notice stating that the court has vacated the rule and that their status will not change due to the rule. If you need help drafting these notices, please reach out to a member of our employment law team.
If you raised employees’ salaries due to either of the salary increases, you should carefully consider whether it is worth the potential impact on employee morale to revert their wages. Many states also have laws requiring advance written notice before decreasing an employee’s pay. For example, in South Carolina, employers must provide 7 days' written notice before any decrease in pay. Please reach out to a member of our Employment Law team if you are considering reverting wages.
