11 Dec Federal court blocks rule that raised minimum salary threshold for FLSA’s overtime exemptions

On November 15, 2024, a federal judge from the Eastern District of Texas vacated the latest overtime rule issued by the Department of Labor that would have made millions of previously exempt employees eligible for overtime compensation under the Fair Labor Standards Act. According to the DOL, in the first year after implementation of the new overtime rule, approximately 4 million workers would either become eligible for overtime pay or have their salary increased. This is no longer the case now that the final rule has been blocked by a federal court.

The DOL’s final rule significantly increased the minimum salary that executive, administrative and professional (“white-collar”) employees must be paid to be exempt from the FLSA’s overtime pay requirements. The federal court, however, found that the DOL exceeded its statutory authority by implementing these salary increases. According to the court, the DOL’s final rule is impermissible because it 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. “Congress elected to exempt employees based on the capacity in which they are employed. It’s their duties and not their dollars that really matter.”

As a result of the court’s ruling, the standard salary level for the FLSA’s white collar exemptions will return to the pre-rule amount of $684 per week ($35,568 per year). The court also vacated the rule’s increased salary threshold for the FLSA’s highly compensated employee exemption, which will now remain at $107,432.

Since change often creates uncertainty, employers should carry Employment Practices Liability Insurance that includes limited wage & hour coverage. Please contact us if you would like to learn more about employment practices liability insurance.