Trent Cotney, Partner, Adams and Reese LLP
As you may recall, on April 23, the Department of Labor (DOL) announced a final rule regarding the minimum salaries required for employees to qualify for overtime pay. That rule took effect on July 1, 2024, and increased the salary thresholds to classify certain employees as exempt.
However, on November 15, 2024, all that changed. Judge Sean D. Jordan of the U.S. District Court for the Eastern District of Texas, in State of Texas v. United States Department of Labor, granted summary judgment for the State of Texas, striking down the 2024 Rule on a nationwide basis.
You are likely aware that the Fair Labor Standards Act (FLSA) states that most employees working more than 40 hours in one workweek are entitled to overtime pay. There are white-collar exemptions for employees categorized as executive, administrative, or professional (EAP). Per the 2019 Rule, employees could be exempt from overtime if they have specified
job duties and do not make less than $684 a week ($35,568 a year). In addition, highly compensated employees (HCE) are exempt if they do not make less than $107,432 a year. The 2024 Rule required the following:
■ The threshold for EAP increased to $844 a week ($43,888 a year) on July 1, 2024.
■ The EAP threshold would increase again to $1,128 a week ($58,656 a year) on January 1, 2025.
■ The HCE annual threshold increased to $132,964 on July 1, 2024.
■ The HCE annual threshold would further increase to $151,164 on January 1, 2025.
■ Future updates to these earnings thresholds would occur every three years based on ongoing wage data.
In addition to salary minimum requirements, employees would qualify for these exemptions if their job duties met certain requirements. The 2024 Rule did not revise the job duties requirements.
Judge Jordan determined that the DOL had exceeded its rulemaking authority. He noted that although the DOL is allowed to use employees’ salaries as a basis to define EAP exemptions, it should not displace the job duties test. He reviewed the 2024 Rule and noted that rather than setting salary levels low for screening out obviously nonexempt employees, it would result in higher numbers of employees being classified as nonexempt even though they met the duties test. In fact, he calculated that at least one-third of employees who met the duties requirements would be categorized as nonexempt.
His decision vacated the 2024 Rule nationwide. This means that the EAP and HCE increases that went into effect on July 1 are canceled and will revert to the 2019 Rule thresholds. In addition, the increases set for January 1, 2025, will not occur as scheduled.
It is possible that the DOL will appeal Judge Jordan’s ruling to the Fifth Circuit. However, as the Trump administration
resumes office in January 2025, the DOL might not take up this fight.
The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation. Trent Cotney is a Partner and Construction Team Leader at the law firm of Adams & Reese, LLP and
FRSA General Counsel. For more information, you can contact him at trent.cotney@arlaw.com or by phone at
813-227-5501.
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