In a significant legal development, a federal judge in Texas has blocked a Department of Labor (DOL) rule that proposed increased salary thresholds for certain exemptions under the Fair Labor Standards Act (FLSA). The decision means the compensation threshold increases that were set to take effect in July 2024 and January 2025 are no longer enforceable. Employers nationwide are now left in a state of uncertainty regarding compliance and potential future changes.
Background on the DOL’s Final Rule
In April 2024, the DOL issued a final rule aimed at updating salary thresholds for specific FLSA exemptions. Key changes included:
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Raising the minimum salary for the Executive, Administrative, and Professional (EAP) exemptions from $684 per week to $844 per week starting July 1, 2024, with a subsequent increase to $1,128 per week on January 1, 2025.
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Increasing the Highly Compensated Employees (HCE) exemption threshold to $132,964 annually on July 1, 2024, and $151,164 annually on January 1, 2025.
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Establishing a mechanism for updating these thresholds every three years.
Other criteria for EAP and HCE exemptions remained unchanged. However, these updates faced legal challenges from multiple parties, including the state of Texas and trade organizations.
Court’s Decision and Its Implications
On November 8, 2024, the Eastern District Court of Texas ruled that the DOL overstepped its authority by setting salary thresholds so high that they overshadow the job duties element of the EAP test. This ruling expanded on an earlier injunction issued in June 2024, which initially applied only to Texas as an employer. Now, the court’s decision has nationwide implications, rendering all provisions of the final rule unenforceable.
The court’s reasoning relied heavily on the Supreme Court’s decision in Loper Bright Enterprises v. Raimundo, which introduced stricter judicial scrutiny over administrative rulemaking. As a result, employers across the country are no longer required to adhere to the updated thresholds.
What Happens Next?
The future of the DOL’s rule is uncertain. The Department of Labor could appeal the decision, but whether such an appeal would be resolved before a new administration takes office in January 2025 remains unclear. Employers should keep the following in mind:
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Review Compensation Plans: If salary adjustments were implemented to meet the now-blocked thresholds, employers may consider whether to maintain those increases or revert to prior compensation levels. Any decisions must comply with current state and local wage laws.
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Stay Compliant: Employers must ensure they meet existing FLSA requirements, even as uncertainty around future changes persists.
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Monitor Legal Developments: A successful appeal could reinstate the blocked provisions, so staying informed on legal updates is critical.
Action Steps for Employers
Employers navigating this complex situation should consult with legal or HR professionals to:
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Assess current compensation strategies in light of the court’s ruling.
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Evaluate the potential impact of reinstating prior thresholds if the DOL’s appeal succeeds.
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Stay proactive by monitoring federal, state, and local compliance requirements.
HR Wise is committed to keeping employers updated on critical regulatory changes. For tailored guidance on how to adapt your compensation policies, contact our team today.
