In a significant legal development, a federal court recently struck down a proposed rule that would have raised the salary threshold for overtime exemption under the Fair Labor Standards Act (FLSA). This ruling has wide-reaching implications for both employers and employees, particularly in industries heavily reliant on exempt workers. Here, we’ll break down what this decision means and what steps employers should consider taking.
The Controversial Rule
In April of 2024, the U.S. Department of Labor (DOL) published it’s final ruling to significantly increase the salary threshold for white-collar exemptions under the FLSA. The final rule raised the minimum salary in two steps. Effective on July 1, 2024, the rule raised the salary threshold to $844 per week ($43,888 annually). In January 2025, the rule was scheduled to raise the salary threshold a second time to $1,128 per week ($58,656 annually).
Proponents of the rule argued that the change was long overdue and would ensure fair compensation for employees putting in long hours. Critics, however, expressed concerns about increased labor costs, potential job losses, and the administrative burden for businesses, especially small and mid-sized employers.
The Court’s Ruling
On November 15, 2024, the U.S. District Court for the Eastern District of Texas invalidated the 2024 final ruling, stating that the DOL exceeded its statutory authority. The judge argued that the proposed threshold focused excessively on salary level rather than job duties, which is the primary determinant of exemption status under the FLSA. The invalidation of the final ruling returns the threshold to the previous update made in 2019 of $684 per week ($35,568 annually).
In its decision, the court emphasized that while salary level is a factor in determining exempt status, the duties test — which assesses whether an employee’s job responsibilities align with executive, administrative, or professional roles — should remain the primary focus.
Implications for Employers
Employers are not required to adjust their salary thresholds or reclassify employees in response to the now-invalidated rule. The decision leaves uncertainty about whether a future revised rule will emerge as the DOL may appeal the ruling, propose a new rule, or take other regulatory actions. While the issue likely isn’t settled, businesses should stay proactive to ensure compliance based on the standing 2019 thresholds. Employers that raised employee salaries or changed exemption statuses to meet the July 1 threshold, which has since been invalidated, should seek legal guidance before making any decisions about rolling back those adjustments.
Have questions about how this impacts your organization? Contact us to understand how this change could affect your team and your business strategy.
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