Overtime Rule Changes Struck Down: What Employers Need to Know

On November 15, 2024, a federal judge in Texas vacated the Department of Labor’s (DOL) most recent updates to the Fair Labor Standards Act (FLSA) overtime exemption rules. U.S. District Judge Sean Jordan ruled that the DOL had exceeded its statutory authority in raising the minimum salary thresholds and implementing automatic triennial adjustments. This decision invalidates the increases implemented on July 1, 2024, and nullifies the planned January 1, 2025, increase. Employers should now revert to the DOL’s 2019 rule, which sets the minimum salary threshold at $684 per week, or $35,568 annually.

Background on the Overturned Rule

The now-invalidated rule aimed to raise the salary threshold for exempt employees to $844 per week ($43,888 annually) starting July 1, 2024, with a further increase to $1,128 per week ($58,656 annually) planned for January 1, 2025. It also sought to raise the highly compensated employee (HCE) threshold and implement automatic adjustments every three years.

These changes would have significantly expanded overtime pay eligibility, requiring employers to adjust salary structures or pay overtime to affected employees. However, Judge Jordan’s ruling stops these adjustments nationwide, reinstating the 2019 threshold and eliminating the planned updates.

What This Means for Employers

• Revert to Previous Thresholds: The salary threshold for exempt employees reverts to the 2019 rule of $684 per week ($35,568 annually).
• No Immediate Action Required: Employers are not required to reclassify employees or adjust salaries unless they choose to do so.
• Option to Keep Existing Adjustments: Employers who made changes to comply with the July 1st or anticipated January 1st thresholds may choose to keep those adjustments in place.
• Consider and Communicate Changes: If reverting employees to their previous salaries or classifications, consider the potential impact on morale and administrative processes. Any changes should be clearly communicated to employees both verbally and in writing to ensure transparency and understanding.

The implications of this ruling are significant for businesses. Employers who adjusted salaries or reclassified employees in anticipation of compliance may choose to maintain those changes or revert them, depending on their business needs. Additionally, while the DOL may appeal, the incoming administration under President Trump may influence the agency’s next steps. We will continue to monitor federal wage and hour regulations to keep our clients informed and compliant. Please don’t hesitate to reach out with any questions or concerns.

For More Information

If you have any questions, please contact our HR team at 210–775–6082, toll-free at 1–888–757–2104, or hr@gbizadvisors.com.