Will New DOL Minimum Salary Increase Affect Your Business – Not Anymore!
Last month,[1] we posted an article that described the challenge businesses faced due to a Department of Labor (DOL) regulation (the “2024 Rule”) that was set to require employers to raise the minimum salary paid to most exempt employees for a second time in six months. The second phase of the 2024 Rule, which would require a salary of $58,656, was set to become effective on January 1, 2025. Now, thanks to a federal court in Texas employers are no longer required to raise salaries comply this new DOL rule.
Last Friday, the Court ruled [2] that the DOL’s 2024 Rule, which would have dramatically raised the required salary twice in six months, and then automatically increase again every three years,[3] was unenforceable. After a lengthy review of various historical rules DOL had used over time to define and clarify the exemptions under the Fair Labor Standards Act (“FLSA”), the judge ruled the 2024 Rule was an unlawful exercise of agency power because it contemplated “sweeping changes … designed on their face to effectively displace the FLSA’s duties test with a predominate – if not exclusive – salary level test.” Having concluded the 2024 Rule was unlawful, the Court then ruled that it was required under federal law to “set aside” the 2024 Rule and make it unenforceable nationwide. As a result, the Texas court’s ruling is not limited just to the parties who brought the lawsuits but applies to all persons in all judicial districts.
Bottom line, the DOL’s 2024 Rule are no longer binding on any businesses.[4] While DOL has a right to appeal, given the outcome of the recent election, it is likely that any appeal will be pursued to a decision. As result, employers are no longer obligated to raise salaries to the levels set forth in the 2024 Rule in order to establish an exemption. The option discussed in the prior article of using a fluctuating work week approach to calculating overtime pay is still an option for those salaried employees whose duties may not qualify them for an exemption. If you have question about the FLSA and other wage and hour issues, please do not hesitate to contact Gentry Locke’s Employment Team.
[1] See article, Will New Minimum Salary Increase Affect Your Business …. (Oct. 17, 2024)
[2] The Court’s ruling came in a 62-page decision in the consolidated cases, Texas v U.S. Dept. of Labor, et. al., Civ Action No. 4:24-cv-00499, and Plano Chamber of Commerce, et. al., v U.S. Dept. of Labor, et. al., Civ Action No. 4:24-cv – 00468 (E.D. Texas November 15, 2024)
[3] DOL’s 2024 Rule imposed increases to the minimum salary for most exemptions in three steps. First, the Rule raise the minimum salary as of July 1, 2024, to $844 per week (a 23.39% increase from pre-existing $684 weekly requirement). Next, the Rule then increased the minimum salary requirement to $1,128 per week (another 33.65% increase in less than six (6) months from the $844 imposed merely six months earlier). Last, it included an automatic increase as of January 1, 2027, and every three (3) years thereafter. The second increase was projected by DOL to affect 3 million workers, and the first affected 1 million workers.
[4] The Court’s decision means not only that there is no “requirement” to raise salaries of otherwise exempt employees on January 1, 2025, but also that employers did not need to raise salaries above the $684 per week or $35,568 per rate that existed prior to July 1, 2024. This result will have little impact on those employers who elected to comply with the 2024 Rule’s requirement earlier this year as it is hard to imagine that those employers will reverse the pay increase previously given.
