U.S. DOL Rule Invalidated Nationwide, Reverting Salary Minimums to 2019 Thresholds

On Friday, Nov. 15, a federal judge in Texas struck down the U.S. Department of Labor’s 2024 rule regarding salary minimums for exemptions from minimum wage and overtime requirements under the Fair Labor Standards Act that had been in effect since July 1. In doing so, the court effectively reinstated the DOL’s 2019 rule on a nationwide basis. This means that certain white-collar workers who meet the duties tests for the various exemptions will be exempt from minimum wage and overtime as long as their earnings meet the 2019 salary thresholds.

The short-lived 2024 rule, which had become final earlier this year, was drafted to provide two major increases in the salary threshold for exempt workers over a six-month period. The first increase occurred on July 1, increasing the minimum salary to $43,888 per year ($844 per week) for those covered by the executive, administrative and professional exemptions, and to $132,964 per year for those exempt as highly compensated employees. The second increase, which was scheduled to take effect on Jan. 1, 2025, would have increased the minimum salary to $58,656 per year ($1,128 per week) for those covered by the EAP exemptions, and to $151,164 per year for the HCE exemption. The 2024 rule also would have provided for automatic increases in the minimum salary thresholds every three years based on up-to-date wage data.

In vacating this rule on a nationwide basis, the Texas judge likened the large salary increases to those that were planned under an Obama-era 2016 DOL rule, which was enjoined before it went into effect and then abandoned by the DOL under the first Trump administration. Specifically, the judge reasoned that these new salary thresholds effectively replaced the duties test with a salary test, thereby exceeding the DOL’s authority over these exemptions. Essentially, wage and other economic data indicates that a too-large portion of the workforce that meets the EAP duties tests would lose the exemption simply because of low compensation. According to the Court, the now-defunct 2024 DOL rule appeared to be establishing a white-collar minimum wage beyond its authority under the Fair Labor Standards Act. The judge also held that the rule’s automatic salary threshold increases violated the Administrative Procedure Act’s notice-and-comment rulemaking requirements.

Given the reversion to the 2019 rule, the minimum salary required for employees covered by the EAP exemptions is once again $35,568 per year ($684 per week). The minimum salary for the HCE exemption has reverted to $107,432 per year. While the DOL could choose to appeal, it seems unlikely that the 2024 rule will ever take effect in its current form, given that the DOL will change hands with the second Trump administration in January 2025. The DOL may then choose to abandon the rule altogether, as it did in 2017, or perhaps issue a different updated rule, as it did in 2019.

The DOL previously estimated that the 2024 rule would have converted 4 million workers from exempt to nonexempt as of Jan. 1, 2025. Given the projected reach of this rule, coupled with the timing of this decision, it is likely that many employers have made plans for, or even implemented, salary increases for its impacted employees. These employers may be wondering what to do now, and to what extent they can, or should, change course.

Practical Tips for Private Employers

• Employers that have already implemented raises in response to the July 1 increase, or in anticipation of the Jan. 1 increase, should consider the impact on employee morale before attempting to roll back such adjustments. Any employers who elect to roll back salaries should consult with legal counsel to ensure such changes do not violate state and local notice requirements related to wage changes.
• Employers that have communicated, though not yet implemented, raises should similarly consider the impact on employee morale before choosing to rescind. These employers should also consult with legal counsel for advice on communicating these changes.
• While the federal salary thresholds have reverted back to the 2019 rates, some states — including California, Colorado, New York and Washington — have higher salary thresholds and/or different duties tests. Employers with employees in these states — including remote employees working from these states — should consult legal counsel for advice on complying with such state regulations.
• All employers should remember that salary is only part of the test when analyzing exemptions — each employee must also satisfy the duties test that corresponds with their exemption. It is always a good idea to consult with legal counsel to confirm that all jobs have been properly evaluated for overtime exemption.

Robinson Bradshaw’s Employment & Labor Practice Group will be closely monitoring and reporting on the latest developments, including any appeals or announcements from the DOL. For assistance in evaluating changes to your workplace, please contact a member of our team.