On November 15, the federal District Court in the Eastern District of Texas struck down the Department of Labor’s (DOL’s) latest attempt to raise the salary threshold piece of the white-collar exemption to the Fair Labor Standards Act’s (FLSA’s) overtime (OT) pay rules. The court ruled that DOL exceeded its statutory authority in promulgating a rule that addressed only the salary threshold piece of the white-collar exemption from FLSA’s OT rules.

The court found that the salary threshold is one valid piece of the white-collar exemption rules, but that it cannot alone determine eligibility for the exemption. The exemption’s duties test must also be considered, the court said. It determined that the salary threshold alone did not just eliminate employees who are non-exempt under the duties test, but also disqualified many employees who meet the duties test but failed eligibility requirements solely because of the salary threshold.

Writing for the court, Judge Sean Jordan said, “When a third of otherwise exempt employees who the Department (DOL) acknowledges meet the duties test are nonetheless rendered nonexempt because of an atextual proxy characteristic—the increased salary level—something has gone seriously awry.”

As a result of the court’s overturning of the white-collar exemption regulation, the salary threshold piece of the exemption test reverts to $684/week ($35,568/year). The now-overturned new regulation would have increased the salary level to $844/week ($43,888/year) as of July 1, 2024, and to $1,128/week ($56,656/year) as of January 1, 2025.

Prospects: DOL announced on December 2 that it will appeal the district court ruling. However, with the change in Administration coming in January, it is unclear whether the agency will do so. However, there is considerable belief that the current $34,568/year salary threshold may be too low, and so it is possible that the Trump DOL will revisit the issue in the coming year(s). But per the Texas district court ruling, such an effort would have to deal with the exemption’s duties test as well as the salary threshold.

NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org; or Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org; or Mike Hedge – Senior Director – Government Relations, at mhedge@naifa.org.