A federal judge in the Eastern District of Texas has blocked the Biden administration’s Fair Labor Standards Act (FLSA) overtime rule, scrapping the rule weeks before the salary threshold was set to increase.
On November 15, 2024, less than 60 days before the second salary increase was scheduled to take effect, the judge granted summary judgment against the U.S. Department of Labor, ruling that the agency’s increase to the minimum salary level in the 2024 Rule exceeded its statutory authority. As a result, the 2024 Rule—originally announced in April and which sought to raise the compensation thresholds for overtime eligibility—has been struck down on a nationwide basis.
The 2024 Rule
The 2024 Rule introduced a two-phase approach to raising the minimum salary threshold under the FLSA’s overtime regulations. The first phase, which took effect on July 1, increased the minimum salary to $43,888 per year (or $844 per week). The second phase, originally scheduled for January 1, 2025, would have raised the threshold further to $58,656 per year (or $1,128 per week). In addition, the 2024 Rule included provisions for automatic updates to the minimum salary level every three years. To be in compliance with the rules, the first phase increase should have taken place on July 1, 2024.
In tossing the 2024 Rule, the Texas judge found that the new salary threshold “effectively eliminates” consideration of whether an employee performs bona fide executive, administrative, or professional duties, replacing the traditional test with what amounted to a “salary-only” approach. This ruling follows a previous decision by the Eastern District of Texas Judge in June, which blocked the application of the first phase of the 2024 Rule to public employers in Texas. The latest ruling extends the block nationwide.
Bottom Line
With the 2024 Rule now blocked in its entirety, the salary threshold set by the 2019 regulations—$35,568 per year ($684 per week)—remains in effect. What are next steps for employers?
- Have you communicated the salary increases to your employees as one-step or two?
- If you’ve only given the increase required by July 1, 2024, can you hold back on the second increase? The answer is yes but be prepared to explain why the second increase will not occur.
- Can you take-back the increase that went into effect on July 1, 2024? In answering yes to this question, keep in mind that just because an employer could rescind the increase, doesn’t mean it should. What is the message to employees who were given a salary increase only to have it taken away?
- For employers with employees in New York, Colorado, California and other states, consider state laws regarding salary levels which are higher than the salary threshold set by the 2024 DOL rules.
It remains to be seen whether President-elect Trump will seek to raise this threshold during his next term, but it is unlikely that his incoming administration will appeal this decision in favor of the 2024 Rule.
Any questions? Employers can consult with their trusted Felhaber attorneys for guidance.