This is a significant development in employment law that impacts how employers classify and compensate a large segment of the workforce.
The Fair Labor Standards Act (FLSA) of 1938 governs how overtime is calculated and paid to covered, or “non-exempt,” employees. The U.S. Department of Labor (DOL) enforces the FLSA and periodically issues regulations that become binding for employers. In 2024, the DOL implemented new rules requiring employers to pay Executive, Administrative, Professional, Outside Sales, and Computer employees a minimum annual salary of $43,888 starting July 1, 2024, and $58,656 starting January 1, 2025. Employees earning below these thresholds would be considered non-exempt under the Act and eligible for overtime pay.
Officially, DOL’s 2024 regulations were vacated on a nationwide basis by a Federal Judge in Texas on Friday, November 15, 2024. The court ruled that the DOL exceeded its authority by establishing these higher exemption thresholds and planning triannual increases. The Memorandum Opinion detailing this decision is attached for your reference. You can read the ruling here.
As a result of the court’s decision, the prior annual salary threshold of $35,568 for exempt employees has been reinstated. Employers who raised salaries in compliance with the July 2024 mandate or planned further adjustments for January 2025 should reassess compensation plans in light of this recent development.
IDHR Consulting is actively advising clients on how to navigate this new development in wage-hour law. We encourage you to contact us at your first opportunity to schedule an appointment to discuss your options and next steps.
