Despite Two Court Rulings on Legality, DOL Salary Threshold Rule Went Into Effect July 1st
July 6, 2024
On Monday, the U.S. Department of Labor’s (DOL) final rule changing the salary level test from $684/week to $844/week took effect as scheduled. This rule is being challenged in several Texas federal courts. It was hoped by some, that one of those Court decisions would result in the issuance of an injunction for the entire United States. However, in one case, the injunction issued on Friday only impacts State of Texas public employees. In the second case, the Court declined to issue an injunction at all (State of Texas v. Unites States Department of Labor).
This means that the U.S. Department of Labor’s final regulations increasing the exempt salary level test went into effect Monday, July 1st for employers in the rest of the United States.
Pursuant to these DOL regulations, in addition to the requirement that employees that are classified as exempt are paid only on a salary basis and also meet the job duties test, employers that classify employees as exempt must also meet the salary level test. This is also known as the “White Collar” exemption tests.
The salary level test applicable to the Executive, Administrative, or Professional exemptions (EAP) as of July 1st requires payment of a base salary of at least $43,888/year, up from $35,568/year, to meet those exemption test requirements.
If you have exempt classified employees that now make under $43,888, they would now have to be treated as non-exempt or to maintain the exempt status their salary would need to be increased above $43,888/year. Changing to non-exempt status means recordkeeping on hours worked and overtime paid at time and one-half for hours worked over 40 in a week.
This new salary level will be in effect until December 31,2024 when the salary level will increase to $1,128/week or $58,656/year. Under these new regulations the salary level will then automatically increases every three years.
Changes to the salary level test are estimated to make up to 1 million employees across the United States non-exempt. When the salary level increases again this upcoming January, another 3 million employees may become non-exempt.
In the case decided on Monday, a federal judge found the employer, Flint Avenue LLC, had not met its “burden of showing irreparable harm that would justify the extraordinary remedy of injunctive relief.”
This leaves one more case challenging the DOL’s exempt classification rules at this stage of judicial challenges. That case is Plano Chamber of Commerce v.U.S. Department of Labor in the Eastern District of Texas. This case raises similar arguments that were successful when the Obama era Exempt Salary Level rules were challenged back in 2016.
Maybe “third time is a charm” down in Texas. ASE will continue following developments around the FLSA exemption tests.
Sources: Warner Norcross + Judd eAlert Court Enjoins FLSA Salary Threshold Increase – But Only for Employers of the State of Texas; Ogletree Deakins Texas Federal Court Delays Effective Date of DOL’s New Overtime Rule As Applied to Texas as an Employer, (6/29/2024); Law 360 Employment Authority. DOL’s Overtime Rule Survives Texas Marketer’s Injunction Bid. (7/1/2024)
By Michael Burns, courtesy of SBAM-approved partner, ASE.
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