Previously, Becker published an article warning employers of a new U.S.
Department of Labor (“DOL”) Rule (the “Rule”) regarding increases to the salary
thresholds for federal exemptions from minimum wage and overtime under the
Fair Labor Standards Act (the “FLSA”). As predicted in the aforementioned
article, there were legal challenges to the Rule and, on November 15, 2024, a
federal court in Texas vacated the Rule. As a result of the court’s decision, the
salary requirements for the executive, administrative, and professional
exemptions (the “EAP Exemptions”) will continue to be $644/week ($35,568
annualized) nationwide. Notably, the required salary increases that went into
effect on July 1, 2024 under the Rule, which was $844/week ($43,888
annualized), are also vacated.
Executive, Administrative, and Professional Exemptions:
For the EAP Exemptions, the FLSA generally requires that employees perform
certain job duties to qualify for exemptions. The Court reasoned that the Rule
exceeded the DOL’s statutory authority because the Rule “is not based on a
permissible construction of [the FLSA] … the minimum salary imposed by the
2024 Rule ‘effectively eliminates’ consideration of whether an employee performs
‘bona fide executive, administrative, or professional capacity’ duties in favor of
what amounts to a salary only test.”
Highly Compensated Employee Exemptions:
The FLSA also includes a highly compensated employee exemption (the “HCE
Exemption”), which provides that employees who earn the requisite salary and
customarily and regularly perform at least one of the duties of an exempt
executive, administrative, or professional employee identified in the standard tests
for exemption are not covered by the minimum wage and overtime requirements.
Prior to the Rule, the salary requirement for the HCE Exemption was $684/week
and $107,432/year. Effective July 1, 2024, the salary requirement was increased
to $844/week and $132,964/year. However, as a result of the Rule being vacated,
the HCE Exemption remains $684/week and $107,432/year. The Court
specifically explained that its “analysis regarding the legality of the changes to the
standard salary level applies equally to the Department’s changes to the HCE
level.”
Conclusion:
What does this change mean for employers? Simply put, employers will not need
to make the choice between raising the salaries or paying minimum wage and
overtime. It is also exceedingly unlikely that the Court’s decision will be
overturned on appeal because (i) the decision will be appealed to the Fifth Circuit
Court of Appeals, which is likely to agree with the Court’s decision, and (ii) the
DOL will be under the authority of an entirely different presidential
administration effective January 20, 2025, which is also likely to agree with the
Court’s decision. It is important to note, that this decision does not affect state
laws requiring higher salary thresholds for employees to qualify as exempt from
minimum wage and overtime requirements. Therefore, staffing companies and
employers must still be aware of state laws.
This article was provided to TechServe by Becker. Learn more about Becker here.
