Overtime Overreach: Court Blocks FLSA Salary Threshold Expansion

Article by: Law Clerk Jose De LunaFLSA Salary ExemptionsThe Fair Labor Standards Act (“FLSA”) requires employers to pay overtime (time and ahalf) when employees work more than 40 hours in a week. However, the FLSA exemptssome employees from qualifying for overtime pay, such as executive, administrative,and professional workers under the “white-collar exemption.” To qualify for theexemption, the employee must meet specific criteria regarding their job duties, be paidon a salary basis, and be compensated at or above the salary threshold.Since 2019, the salary threshold had been $684 per week ($35,568 annually) but wasincreased in 2024 to $844 per week ($43,888 annually) through a Department of LaborRule (“DOL”). Additionally, the rule scheduled another increase effective January 1,2025, and created automatic increases every three years. Increases to the exemptionthreshold meant that qualified employers would either have to increase salaries or berequired to pay overtime to employees who fell below the threshold.The Court’s DecisionOn November 15, 2024, a U.S. District Court in Texas vacated and set aside the DOL’sfinal rule. Texas v. United States Dep't of Lab., No. 4:24-CV-468-SDJ, 2024 WL4806268 (E.D. Tex. Nov. 15, 2024). The decision invalidated all three increases to theexemption threshold: the 2024 increase, the scheduled 2025 increase, and theautomatic increases every three years from 2025. The Court reasoned that the DOLexceeded the scope of the FLSA and would “effectively eliminate” consideration of thejob duties, improperly making the exemption a “salary-only test.”What Employers Should KnowEffective immediately, the 2019 rules are back in effect nationwide with the salarythreshold of $684 per week. Moving forward, the Biden Administration may appeal thedecision, but the incoming Trump Administration will likely take over the case, leavinguncertainty on an appeal’s fate. The long-term reach of the struck down rule may haveled some employers to increase current salaries or plan to increase future salaries.Employers may desire to reduce wages or no longer go through previously scheduledincreases. However, before doing so, employers should consider the potentialramifications such as employee morale, a possible appeal of the decision, andcontractual agreements to increase salaries.Our team of attorneys are available to discuss overtime exemption issues and othermatters related to the FLSA.