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Current Status Of Dol’s 2024 Rule Increasing Salary Thresholds For Flsa White Collar Exemptions
Wednesday, October 9, 2024
Current Status Of Dol’s 2024 Rule Increasing Salary Thresholds For Flsa White Collar Exemption
In April, 2024, the U.S. Department of Labor (DOL) announced a new rule that would increase the minimum salary requirements for the “white collar” exemptions (i.e., executive, administrative, and professional exemptions) from minimum wage and overtime pay requirements under the Fair Labor Standards Act (FLSA) in two stages. This rule, which took effect on July 1, 2024, first increased the minimum salary threshold for the white collar exemptions from $684/week ($35,568 annually) to $844/week ($43,888 annually). A second increase is slated to go into effect on January 1, 2025, and will raise the minimum salary threshold to $1,128/week ($58,656 annually). The rule also increased the salary basis for highly compensated employees to $132,964/year on July 1, 2024, with another increase to $151,164/year slated for January 1, 2025. Finally, the above salary thresholds will be updated with potential automatic increases every three years to reflect current wage data, beginning July 1, 2027.
Legal Challenges
As expected, there have been several legal challenges to the 2024 rule. These lawsuits generally seek to invalidate the rule as exceeding the DOL’s statutory authority because of the rule’s focus on minimum salary levels rather than an employee’s primary job duties to assess whether they should be exempt.
Shortly before the 2024 rule’s July 1, 2024 effective date, District Judge Sean Jordan in State of Texas v. U.S. Dep’t of Labor – the key litigation pending in a Texas federal court – issued a decision narrowly enjoining the DOL from enforcing the rule and raising the minimum salary thresholds. In the ruling, Judge Jordan held that the plaintiff (the State of Texas) was likely to succeed on the merits of its claim that the DOL may not impose a salary minimum for application of the “white collar” exemptions, finding that “since the [white collar exemption] requires that exemption status turn on duties—not salary—and the 2024 Rule’s changes make salary predominate over duties for millions of employees, the changes exceed the [DOL’s] authority delegated by Congress.1 The preliminary injunction was limited, however, to the State of Texas in its capacity as an employer of state employees. Other challenges to the rule, including requests for nationwide injunctive relief, remain pending.
More recently, the Fifth Circuit in Mayfield v. Department of Labor affirmed a more modest salary threshold increase by the Trump administration in 2019. The Fifth Circuit’s decision stems from a legal challenge to a 2019 DOL rule, and addressed only whether the DOL has the authority to define the “white collar” exemptions in terms of a salary threshold requirement.2 While the opinion did not address the DOL’s authority to implement larger increases (such as those in the 2024 rule), the opinion does suggest that excessively high threshold increases that bear no rational relationship to the text or structure of the FLSA may exceed the DOL’s authority, specifically if such increases overshadow the job duties test. Thus, the door remains open as to whether the Fifth Circuit would agree with Judge Jordan’s 2024 conclusion that the 2024 increases “make salary predominate over duties for millions of employees,” and therefore “exceed the [DOL’s] authority delegated by Congress.3
Employer’s Next Steps
Judge Jordan indicated that he expects to resolve the State of Texas v. U.S. Dep’t of Labor case on the merits before the scheduled January 1, 2025 increase takes effect. However, as of now, the 2024 rule remains in effect, and employers should ensure compliance with the July 1, 2024 increase, and prepare in the event that the January 1, 2025 increase takes effect.
For employers that have employees currently below the July 1, 2024 salary threshold increase ($43,888.00), DOL regulations provide for a one-time “catch-up” payment by the end of the year. The catch-up payment must be made by the next pay period following the end of the calendar year, and be sufficient to meet the applicable salary threshold. Employers with employees currently below the new threshold should consider planning to make such a payment at end of year, in the event the 2024 rule remains in effect. Employers should also plan for further increases on January 1, 2025, in the event the 2024 rule’s next increase is not enjoined.
SSP Law will continue to monitor the situation over the coming months and will continue to update this information as new developments arise. If you have any questions regarding the 2024 DOL salary threshold increase rule or potential steps to ensure compliance with the same, please feel free to contact our office.
Authored by Bailey E. Sharpe, Esq. and Joshua M. Smith, Esq.
1. State of Texas v. U.S. Dep’t of Labor, No. 4:24-CV-499-SDJ, 2024 U.S. Dist. LEXIS 114903, at *28 (E.D. Tex. June 28, 2024).
2. See generally Mayfield v. U.S. Dep’t of Labor, No 23-50724, 2024 U.S. App. LEXIS 23145 (5th Cir. Sept. 11, 2024).
3. State of Texas, at *28.
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