NEWS: On November 15, 2024, the U.S. District Court for the Eastern District of Texas vacated the Department of Labor’s (DOL) 2024 overtime rule, which would have significantly raised the salary thresholds for overtime exemptions under the Fair Labor Standards Act (FLSA). The court’s ruling prevents the rule from taking effect nationwide.
The League published a Compliance Courier in April 2024, just after the DOL released its rule. Our Courier explained what the rule would have done:
- The FLSA generally requires covered employers to pay employees a federal minimum wage and, for employees who work more than 40 hours in a week, overtime pay of at least 1.5 times an employee’s regular rate of pay. But the FLSA exempts certain employees from its overtime requirements if they work in a bona fide “executive, administrative, or professional” (EAP) capacity, as those terms are defined in DOL regulations. The definitions include a salary threshold. The DOL’s rules also provide an alternative test for certain “highly compensated employees” who are paid a salary, earn above a higher total annual compensation level, and satisfy a minimal duties test.
- Currently, the salary EAP threshold is $684 per week ($35,568 per year). The threshold for highly compensated employees is $107,432 per year.
- Beginning July 1, 2024, the rules will increase the EAP threshold to $844 per week ($43,888 per year). They will also raise the annual compensation threshold for highly compensated employees to $132,964 per year.
- Beginning January 1, 2025, the rules will raise the EAP threshold to $1,128 per week ($58,656 per year). They will also raise the annual compensation threshold for highly compensated employees to $151,164 per year.
- Beginning July 1, 2027, and every three years after that, the salary thresholds will automatically update.
The court’s order restores the previous salary thresholds from 2019: $35,568 annually ($684 weekly) for standard exemptions and $107,432 annually for highly compensated employees.
The League’s outside law firm, Husch Blackwell, recently published a Legal Update about the ruling. It included these suggested steps:
- Employers should review their workforce classifications to ensure exempt employees meet the duties test and are compensated in alignment with, at a minimum, the restored thresholds.
- Employers should also monitor developments, as the DOL may appeal the court’s decision or (more likely) abandon the 2024 rule in favor of new rules. An important consideration for all of this is the upcoming change in administrations. The past provides insight into how the Trump Administration might handle this situation. In 2017, the first Trump Administration effectively abandoned the Obama-era rule and replaced it with a new rule that had a more modest increase to the salary thresholds. The incoming second Trump Administration is likely to do so again.
- For now, employers are permitted to roll back the salaries for employees affected by the July 1, 2024, increase, but this could cause employee morale and retention issues. Employers may choose to instead leave the increased salaries in place, while considering those increased salaries when making future compensation decisions. Employers must also keep in mind that many state laws are more protective than federal law, and employers must follow applicable state laws’ minimum salary thresholds for exemptions.
The League will alert you to any future developments related to this rule.
As always, credit unions with employment law questions can reach out to The League’s Legal Affairs team at (608) 640-4050 or by email. If more help is needed, we can refer you to the HR Legal Line, which offers credit unions up to one hour of free help from experienced Husch Blackwell HR attorneys. HR Legal Line assistance is free to WCUL member credit unions; The League covers the cost. Credit unions should only contact the HR Legal Line after being referred on a particular matter.