Big Change Overtime Law - Back to the Future

There has been a recent change in the ongoing Fair Labor Standards Act overtime rule update that businesses need to know about. On November 15 the planned update was invalidated, nationwide, by a federal District Court in Texas. Sparing you the legalese, here are the key takeaways.

1. The US Department of Labor’s 2024 Final Rule has been vacated nationwide. The Final Rule increased the salary thresholds for determining employee exempt/non-exempt status under the federal overtime laws. The ruling takes effect immediately.

2. The court’s decision invalidates the proposed January 1, 2025 salary increase for the overtime exemption, planned increases after that, and retroactively invalidates the salary threshold increase that took effect on July 1, 2024.

3. The applicable salary thresholds are now back to pre-July levels: $35,586/year, $684/week for the executive, administrative and professional exemption; $107,432 for the highly compensated employee exemption.

4. The Final Rule, had it survived legal challenge, was estimated to increase the eligibility for overtime pay of 3.6 million workers.

5. The court’s ruling was based upon a determination that DOL exceeded its authority in promulgating the Final Rule. In particular, the court held that under the FLSA exempt status must be determined primarily by job function, not salary level, which the DOL rule would have effectively reversed.

What comes next is difficult to predict. It is unclear whether DOL will appeal the ruling. If it does there is a possibility that the district court’s decision could be put on hold, but that is only a possibility. The uncertainty is complicated by the upcoming change of Administrations in January, 2025. If the Biden DOL were to ask a court to reinstate the rule until appeals are exhausted, it is questionable whether a Trump DOL would continue the appeal.

For now all we can do is wait and see, and adjust determinations of exempt/non-exempt employee status based on the rules as they existed as of June 30, 2024. We welcome your questions about how this change could affect your workforce.

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