Texas Judge Vacates DOL’s Minimum Salary Threshold Expansion

Following new DOL rules is akin to watching Nebraska weather. If you don’t like it, wait a few minutes and it will change. As previously reported, in April 2024 the U.S. Department of Labor (“DOL”) issued a Final Rule increasing the minimum salary thresholds for executive, administrative professional, and “highly-compensated” employees to be exempt from overtime. On November 15, a Texas federal judge struck down the Final Rule after finding the DOL exceeded its statutory authority. The court’s ruling applies on a nationwide basis and vacates both the July 1, 2024, and upcoming January 1, 2025, increases to the minimum salary threshold as well as the subsequent automatic updates to the minimum salary threshold.

The result is that the pre-July 1, 2024, rules go back into effect. The overtime exemption will again be available to “highly compensated” employees whose annual salary is at least $107,732 per year and white-collar employees whose salary is at least $684 per week (equivalent to $35,568 per year). This assumes, of course, that the employees’ duties continue to meet the Labor Department’s test(s). Once again, employers are placed in a difficult position. If they raised employees’ salaries to comply with the July 1 increase, reducing employees’ salaries now, while legal, may create a serious morale problem. If the previously classified exempt employees were reclassified as non-exempt, they can once again be reclassified as exempt by making them salaried. However, if such employees have been earning overtime pay in the meantime, they may be reluctant to lose the overtime compensation.

While it is possible that the U.S. Court of Appeals for Fifth Circuit may reverse the district court’s decision, the incoming Trump Administration will, most likely, revoke the Final Rule in its entirety. As a result, we do not believe it is likely that further increases to the salary basis threshold will be pursued by the DOL in the near future.

If you have any questions as to whether to adjust employee compensation in response to the Judge’s Order or what factors you should consider in determining whether to return non-exempt employees to exempt status or reduce the salaries of exempt employees, please don’t hesitate to contact any member of the Fraser Stryker Labor and Employment group.