On November 15, 2024, the United States District Court for the Eastern District of Texas vacated the Department of Labor's (the “DOL”) 2024 Final Rule (the “Final Rule”), which raised the salary threshold for the executive, administrative, and professional (“EAP”) exemptions under the Fair Labor Standards Act (FLSA) from minimum wage and overtime requirements. In this highly anticipated decision, the court declared the rule unlawful, blocking its enforcement nationwide.

The Final Rule

In April 2024, the DOL issued the Final Rule, which provided that the minimum salary threshold for EAP exemptions would be raised from $35,568 per year to $43,888 per year on July 1, 2024. It was then scheduled to increase the minimum salary to $58,656 per year on January 1, 2025. The Final Rule also raised the total annual compensation threshold for the “highly compensated employee” exemption from $107,432 to $132,964 as of July 1, 2024. This threshold was set to increase further to $151,164 per year on January 1, 2025. Finally, the Final Rule was set to update the minimum salary threshold every three years.

Impact of the Order

Since the court’s order vacates the rule nationwide, the previous salary levels in effect before July 1, 2024, are reinstated. This includes the standard salary level of $35,568 per year and the highly compensated employee exemption threshold of $107,432 per year.

The DOL may file an appeal, but it is unlikely that a final decision would be rendered before the upcoming presidential transition. After the transition, the Trump Administration could withdraw the appeal or choose not to defend the case further. Alternatively, the new administration might proceed with the appeal to preserve its rulemaking authority, but later withdraw the Final Rule and initiate new rulemaking proceedings. For now, the Final Rule cannot be enforced by the DOL.

Next Steps for Employers

While awaiting a decision on a potential appeal and the finality of the Eastern District's ruling, as well as guidance from the DOL on this matter, employers should exercise caution before making any decisions regarding employee salaries and classifications.

In the meantime, employers should still consider their next steps. Employers who were considering raising their employee’s salaries or reclassifying their employees may no longer need to take any action. Employers who previously raised employee salaries in response to the July 1 increase may consider reverting salaries to their pre-Final Rule levels. However, these employers should be cautious, as such a move is likely to be unpopular with employees, and several states require employers to provide advance notice of any wage reductions.

Further, as noted in our September Newsflash, the Final Rule did not change or adjust the respective “duties tests” that are applicable to the EAP exemptions. Thus, employers should still take time to ensure all employees classified as exempt, and any employees that may be reclassified as exempt in light of the Eastern District’s ruling, meet the applicable duties tests.

Koley Jessen will continue to monitor developments related to the Final Rule. If you have any questions or would like assistance strategizing how your business can respond to this decision, we encourage you to contact one of our experienced employment attorneys for guidance and support.

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