In April of this year, FGKS Law issued a Client Alert regarding the U.S. Department of Labor’s (“DOL”) final rule (the “Rule”) that, among other changes, increased the salary threshold for employees classified as exempt under the Fair Labor Standards Act (“FLSA”). Specifically, the Rule raised the salary threshold for exempt employees from $35,568 to $43,888, effective July 1, 2024, with a further increase to $58,656 scheduled for January 1, 2025.
As noted in our April alert, the DOL’s Rule was subject to ongoing litigation. One of the federal courts evaluating the DOL’s authority to issue the Rule recently issued an order vacating the Rule in its entirety; holding that the DOL had exceeded its statutory authority when it enacted the Rule. That court’s order effectively prohibits the Rule from being enforced nationwide. The court emphasized that, under the FLSA, the key factor in determining exemption status is an employee’s duties, not their salary level. The court further found that the DOL’s Rule essentially replaced the duties test with a salary-only test, which it ruled was inconsistent with the FLSA. The court also ruled that the DOL lacked authority to implement automatic triennial salary increases without notice and comment under the Administrative Procedures Act, which governs federal agency rulemaking.
Impact of the Ruling: As a result of the court’s decision, the DOL’s Rule is no longer enforceable. This means:
- The minimum annual salary increase to $43,888 that went into effect July 1, 2024 is now void.
- The proposed January 1, 2025 annual salary increase to $58,656 will not go into effect.
- The salary threshold for exempt employees reverts to the previous minimum annual salary of $35,568 ($684 per week).
Employers should continue to rely on the salary threshold of $35,568 until further notice when evaluating whether their employees meet the minimum salary test for exempt employees under the FLSA. The DOL may appeal the court’s ruling or attempt to revise the Rule in accordance with the court’s decision, but for the foreseeable future, the minimum annual salary for exempt employees remains $35,568.
Employers who previously made changes to comply with the July 1, 2024, salary increase deadline may now choose to either maintain those changes or modify the employee’s compensation in light of the court’s ruling, although there could be negative implications when doing so. Given the complexity of this issue, we recommend that employers carefully evaluate their options and consult with legal counsel before implementing any decisions.
We will continue to monitor this development and provide updates as necessary. Please contact us if you have any questions or need assistance with your overtime policies or employee classifications.
Original Publish Date: November 19, 2024
