On November 15, 2024, the U.S. District Court for the Eastern District of Texas vacated, i.e. reversed/overturned the U.S. Dept of Labor’s “overtime” rule that had gone into effect July 1. This ruling applies nationwide and means that all changes with salaries and reclassifications revert back to what they were prior to July 1, 2024 under the Fair Labor Standards Act (FLSA). Here are two different sources with details on what this change means to businesses. We’ll keep you informed of any additional updates as they come through.
1. From Yeo & Yeo Accounting Firm:
On November 15, 2024, a federal court struck down the Department of Labor (DOL) rule that raised the salary threshold for executive, administrative, and professional employees to be exempt from minimum wage and overtime pay under the Fair Labor Standards Act (FLSA). This nationwide ruling affects all businesses and nullifies:
- The July 1, 2024, increase from $684 per week to $844 per week.
- The January 1, 2025, planned increase to $1,128 per week.
- Future automatic increases every three years starting July 1, 2027.
What should employers do?
- Salary Adjustments: Employers who raised salaries to meet the July 1 threshold or in anticipation of the January 1 increase may revert to previous pay rates but should consider employee morale.
- Reclassification: Workers reclassified as nonexempt under the 2024 rule may be switched back to exempt if they meet the duties test, with advance notice where required.
2. From the MI Chamber of Commerce:
Federal overtime rule vacated
What happened: On Nov. 15, a federal judge in Texas permanently blocked a Biden administration rule that took effect in July with the goal of making more salaried U.S. workers eligible for overtime pay. The court criticized the U.S. Department of Labor (DOL) for improperly basing eligibility for overtime pay on workers' wages rather than their job duties.
Why it matters: The rule would have required employers to pay overtime premiums to salaried workers who earn less than $1,128 per week, or $58,656 per year, when they work more than 40 hours in a week, beginning Jan. 1, 2025, and it had temporarily raised the threshold to about $43,880 per year on July 1. The ruling means the previous threshold of $35,568 ($684 per week), which was set in 2019, is now back in effect.
What’s next: The DOL may seek to appeal the District Court’s ruling; however, even if the DOL appeals the ruling, the incoming Trump administration is expected to abandon the appeal.
- Employers should monitor the situation for updates.
- Employers wishing to untangle changes already made are encouraged to seek legal counsel.
Go deeper: Read a full update on this issue written by our friends at Barnes & Thornburg LLP.