Court Strikes Down DOL’s Overtime Salary Threshold Rule

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The U.S. District Court for the Eastern District of Texas recently invalidated the Department of Labor’s (DOL) final rule that increased overtime exemption salary thresholds under the Fair Labor Standards Act (FLSA). The court ruled that the regulation exceeded the agency’s statutory authority. The decision nullifies the salary threshold increase that took effect in July 2024 and the planned increase for January 2025. The nationwide ruling reverts the threshold to $684 per week ($35,568 annually) and $107,432 annually for highly compensated employees.

The court determined that the DOL’s rule improperly emphasized salary thresholds, effectively overshadowing the requirement to evaluate whether employees perform exempt duties. This ruling aligns with a Fifth Circuit Court decision limiting the DOL’s authority to set salary thresholds that “replace or swallow” statutory exemptions. The now-vacated rule raised the salary threshold to $844 per week ($43,888 annually) on July 1, 2024, with a planned increase to $1,128 per week ($58,656 annually) on January 1, 2025.

For now, employers are no longer required to adjust salaries to meet the previously planned increases under the vacated DOL rule. However, reviewing current pay practices and evaluating the potential reinstatement of exempt status for employees affected by the July 2024 changes is essential. Employers should consult legal counsel to ensure compliance with wage laws, especially in states with stricter requirements.

The DOL may appeal the decision, but with the impending presidential transition in January 2025, the likelihood of the rule being reinstated appears low. Employers should monitor further developments and adjust their compliance strategies accordingly.