A federal court has blocked the U.S. Department of Labor’s new rule that would have dramatically increased the salary threshold for white collar exemptions.
On November 15, 2024, the U.S. District Court for the Eastern District of Texas set aside the DOL’s final rule, which puts back in place the exemption thresholds of $684 per week ($35,558 per year) for white collar employees and $107,432 for highly compensated employees.
The rule
As noted in our previous article on this topic, on April 23, 2024, the DOL published its final rule increasing the salary threshold for white collar exemptions (executive, administrative, and professional) and the highly compensated exemption under federal minimum wage and overtime law.
On July 1, the thresholds increased to $43,888 for white collar exemptions and to $132,964 for highly compensated exemptions. On January 1, 2025, those thresholds were set to increase again to $58,656 and $151,164, respectively.
The decision
In a 62-page decision, the court found that by increasing the thresholds so dramatically, the DOL altered the existing exemptions test from one that balanced both employee responsibilities and salary into one that was essentially a “salary only” test.
This alteration, the court said, was a departure from the text of the Federal Labor Standards Act (FLSA), and an overreach of the DOL’s authority. Based on those findings, the court invalidated the rule and reset the thresholds to what they were prior to the new rule.
What does this mean for employers?
The immediate impact of this decision is that employers no longer need to worry about the planned January threshold increase. Also, the increase that happened in July is no longer in effect.
This leaves employers who provided raises or reclassified employees to account for the July increase in a hard spot.
Employees that were reclassified as non-exempt under the increased threshold may now again qualify as exempt. But employers should think twice before taking back any raises they gave employees to keep their exempt status under the increased threshold, as doing that could have real negative impacts on employee morale and workplace culture.
It’s possible that the DOL will appeal this decision, and if it’s overturned in a higher court, the higher thresholds will be set back. This is probably an uphill battle for the DOL, though. It’s also possible that the Trump administration will rescind the new rule and decline to continue any appeal of this court’s decision.
We are monitoring this situation closely and will update you on any changes. We’ve also updated our Exempt Non-Exempt Analyzer to reflect the current salary thresholds. For more information about this issue, you can review our previous article and its follow up—or watch our webinar on employee classification.
