On Friday, November 15, 2024, a federal judge in Texas invalidated the U.S. Department of Labor’s (DOL) rule raising the minimum salary threshold for the Fair Labor Standards Act’s (FLSA) executive, administrative, and professional (EAP) exemptions. The nationwide injunction prohibits the upcoming January 1, 2025, increase and invalidates the July 1, 2024, increase, reverting the salary threshold to 2019 requirements ($35,568 annually).
The FLSA exempts employees in EAP roles from minimum wage and overtime pay requirements. For an employee to be qualified under the EAP exemption, they must 1) perform certain primary duties as part of their role and 2) meet the DOL’s salary threshold. The DOL raised the salary threshold on July 1, 2024, to an annual salary of $43,888, and was set to increase the threshold again on January 1, 2025, to an annual salary of $58,656.
In June 2024, U.S. District Judge Sean Jordan for the Eastern District of Texas enjoined the DOL rule against businesses and employees within the state of Texas. That original lawsuit was recently consolidated with a lawsuit brought by businesses and national associations seeking to expand the injunction nationwide.
Ruling on the parties’ motions for summary judgment, Judge Jordan found that both the July 2024 and January 2025 increases were unlawful. According to the Court, although the DOL may use salary as a part of its authority to define and delimit the EAP exemptions, it cannot “displace” the duties test altogether because the so-called salary-basis test “is not included in the statutory text.” Essentially, the Court found that because “the 2024 Rule’s changes make salary predominate over duties for millions of employees, the changes exceed the Department’s authority to define and delimit the relevant terms.”
What does this mean? Employers who were planning to convert employees from exempt to non-exempt on January 1, 2025, solely because of the federal salary threshold may press pause for now. If you were planning to convert employees because they do not meet the EAP duties test, this ruling does not impact the duties test. Finally, check the salary thresholds in the states. Several states (Alaska, California, Colorado, Maine, New York and Washington) have higher salary thresholds than that issued by the U.S. Department of Labor.
If you have any questions or need further assistance, please contact your attorney at Barton or reach out to a member of Barton’s Labor & Employment Group.
Richard H. Block
Philip S. Mortensen