Estate and Succession Planning
Dean Mead’s Estate and Succession Planning Department is one of the largest and most respected groups of estate planning attorneys in Florida. We are frequently…
Published: December 3, 2024
A federal court in Texas has overturned a U.S. Department of Labor (DOL) final rule that was intended to extend overtime pay eligibility to millions of previously exempt workers. (Click HERE to review “A Shift in Compensation” to learn more.)
The rule increased the salary threshold required to meet the exemption from overtime for employees whose duties qualified for the administrative, professional, executive, outside sales, and computer employee exemptions and for employees who qualified for exemption as a “highly compensated employee” regardless of duties. (Click HERE to review the DOL’s “Fact Sheet #17A: Exemption for Executive, Administration, Professional, Computer & Outside Sales Employees Under the Fair Labor Standards Act to learn more about the threshold and test.)
The rule raised the salary threshold effective from $684/week or $35,568 annually to $844/week or $43,888 annually as of July 1, 2024 and would have raised the threshold to $1,128/week or $58,656 annually as of January 1, 2025. Highly compensated employee salary thresholds would increase from $107,432/annually to $132,964 on July 1, 2024 and $151,164 on January 1, 2025. Thereafter, the rule provided for an increase in the thresholds every three years beginning July 1, 2027.
The rule was initially challenged in June, 2024 and the U.S. District Court for the Eastern District of Texas enjoined the implementation of the rule for public employers in Texas.
It did not extend the injunction to private employers or outside of Texas and this, for businesses in other states, including those in Florida, the overtime rule took effect on July 1, with a six-month grace period for employers to comply.
However, on November 15, 2024, the U.S. District Court for the Eastern District of Texas struck down all components of the rule, halting its January 2025 implementation. The court concluded that the DOL had exceeded its statutory authority. While the court acknowledged salary can be considered when defining and limiting exemptions, it found the salary threshold cannot be set so high that it overrides the duties test.
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So, what happens next? For now, minimum salary levels have reverted to the pre-2024 amounts –$684/week or $35,568 annually for most exemptions or $107,432/annually for highly compensated employees. However, the DOL is expected to appeal the decision, and the court of appeals may issue a stay to keep the rule in effect while it considers the case. It is also possible that the incoming Trump administration will withdraw the appeal or withdraw the rule itself.
It is important for employers to stay informed of any updates that may reinstate the higher thresholds.
