FLSA Alert: Overtime Rule Struck Down
FLSA Overtime Exemption Rule Struck Down
A federal district court struck down the US Department of Labor’s 2024 rule increasing the minimum salary required for overtime exemptions under the Fair Labor Standards Act (FLSA) on November 15.
History:
The 2024 rule increased the minimum salary required for exempt status under the administrative, executive, and professional exemptions.
The ruling had three stages:
- Increase exempt salaries to $43,888 effective July, 1 2024
- Increase exempt salaries to $58,656 effective January 1, 2025
- Automatic updates to the salary threshold every three years, beginning in July 2027
The court’s decision struck down all three stages, including the increase that already went into effect on July 1, 2024.
What does this mean for employers?
The 2024 rule was canceled on a nationwide basis. This means the pre-July salary threshold of $684 per week or $35,568 per year, is again the new standard.
Employers who were planning to raise salaries on January 1, 2025, to maintain employees’ exempt status under the 2024 Rule could reconsider those increases. Likewise, employers who were planning to reclassify employees as non-exempt prior to January 1 rather than increase salaries can maintain those employees’ exempt status (as long as the exemption tests are met, of course). If you had already communicated January 1st changes to employees, however, we recommend carefully considering how you will communicate a shift in course. And, of course, employers may choose to raise salaries regardless of the minimum required for the EAP exemptions, and may reclassify positions as nonexempt, since that is the default status under the FLSA.
Employers who raised salaries earlier this year to satisfy the July 1st increase, or who had already raised salaries to the January 1, 2025, level, could reduce those salaries to the pre-July 1 level going forward (though not retroactively). However, we recommend taking into consideration the potential ramifications to employee morale that could follow such a change, trying to temper any negative response — and it may be worth waiting until we see what happens with a potential appeal. Additionally, employers should be sure to comply with any applicable state and local laws requiring advance written notice of wage changes, although we recommend a carefully crafted communication regardless of such notification requirements. Finally, employers should bear in mind that several states still have higher salary thresholds for exempt employees.
