Federal Court Strikes Down US DOL Overtime Exemptions Rule Nationwide
27th November 2024
ADP.
On November 15, 2024, a Texas federal court struck down a U.S. Department of Labor (DOL) rule that raised the minimum salary required to be paid to most employees classified as exempt from overtime and minimum wage requirements under the Fair Labor Standards Act (FLSA). The court’s order invalidates the rule nationwide effective immediately.
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On April 23, 2024, the DOL released a final rule that would have raised the minimum salary required to be paid to most employees classified as exempt from the FLSA overtime and minimum wage requirements (the salary level test). The final rule specifically impacted those employees classified as exempt under the executive, administrative and professional employee exemptions.
The final rule raised the minimum salary in two phases. First, the final rule raised the salary amount from $684 per week ($35,568 annually) to $844 per week ($43,888 annually) effective on July 1, 2024. A second increase would have raised the salary amount to $1,128 per week ($58,656 annually) on January 1, 2025.
The final rule also increased the salary amount for certain highly compensated employees (HCEs) who are paid a salary, earn above a higher total annual compensation level, and satisfy a minimal duties test. Employees meeting the requirements of this alternative HCE test, are also exempt from the FLSA overtime and minimum wage requirements. The final rule increased the amount required to be paid to HCEs from $107,432 annually (including at least $684 per week paid on a salary or fee basis) to $132,964 annually (including at least $844 per week paid on a salary or fee basis) effective on July 1, 2024. A second increase would have raised the amount to $151,164 (including at least $1,128 per week paid on a salary or fee basis) on January 1, 2025.
Finally, the rule would have provided for an automatic update to the minimum salary and HCE amounts every three years.
UPDATE: Small business owners breathe easier over labor costs after decision to strike down overtime rule (Associated Press)
UPDATE: Overtime Rule Blocked by Court, Salary Level Takes Big Drop to $35K (HRMorning)
UPDATE: What employers should know now that the 2024 overtime rule is vacated (HRDive)