On Friday, November 15, 2024, a federal district court in Texas struck down the U.S. Department of Labor’s final rule issued in April 2024 that increased the minimum salary requirements for the Fair Labor Standards Act’s white-collar overtime exemptions. Judge Sean D. Jordan found that the DOL lacked the statutory authority under the FLSA to raise the minimum salary requirements in the manner that the 2024 rule did. Importantly for Pennsylvania employers, this decision vacates the new FLSA minimum salary requirements on a nationwide basis.
As we previously discussed, the DOL’s April 2024 rule increased the minimum salary requirements for the FLSA’s white-collar exemptions from $684 per week ($35,308 annually) to $844 per week ($42,888 annually) effective July 1, 2024, with another large increase to $1,128 per week ($58,656 annually) scheduled to take effect on January 1, 2025.
With this decision, the increased minimum salary requirement that was supposed to take place on January 1, 2025 will not take effect as scheduled. The court also invalidated the increased minimum salary requirement that went into effect on July 1, 2024.
The court found that these significant minimum salary increases essentially created a de facto “salary-only” test for the white-collar exemptions, which the court said was contrary to the FLSA’s statutory language. The court also struck down the automatic update (i.e., increase) provision of the 2024 rule, which would have automatically changed the minimum salary threshold every three years based on earnings data, with the first automatic update scheduled for July 1, 2027.
The minimum salary requirement for these FLSA exemptions now reverts back to the $684 per week number under the prior DOL regulations that took effect in 2020.
The DOL may appeal the decision to the Fifth Circuit Court of Appeals. With the pending transition to the Trump administration in January, it is doubtful that the incoming DOL leadership would pursue such an appeal. Whether the Trump DOL will consider changes to the overtime exemption requirements through regulatory action is currently unknown.
If you have any questions about how this decision impacts employee exemptions or your obligations under the FLSA, reach out to any member of the McNees Labor & Employment Group.