On November 15, 2024, the United States District Court for the Eastern District of Texas issued a decision, in Plano Chamber of Commerce v. United States Department of Labor, which set aside and vacated the Fair Labor Standards Act (FLSA) regulations that substantially increased the minimum weekly salary for employees to qualify as exempt from the FLSA’s overtime pay requirements.
As we reported in June 2024, the United States Department of Labor (DOL) published its final regulations, which increased the salary threshold under the FLSA for White Collar Exemptions, on April 26, 2024.
In 2019, the minimum weekly salary for employees to qualify as exempt from the FLSA’s overtime pay requirements increased to $684 per week ($35,568 annually). As a result of the final regulations, effective July 1, 2024, the minimum weekly salary increased to $844 per week ($43,888/year). The new regulations imposed another increase on January 1, 2025, when the minimum weekly salary was scheduled to be raised to $1,128 per week ($58,656/year). The new regulations also provided that the regular weekly salary level would be updated by the DOL at least every three (3) years using available data and methodologies to update the salary levels, such that the next increase after January 1, 2025, would have been scheduled to occur on July 1, 2027.
On September 11, 2024, the U.S. Court of Appeals for the Fifth Circuit joined four (4) other federal courts when it held that the DOL has the authority to author and enforce rules governing a minimum weekly salary for FLSA purposes. However, the decision by the Texas Federal Court earlier this month, as well as statements by President-Elect Trump during the campaign, create significant uncertainty regarding the enforcement of these regulations. The Trump Administration has several options – (1) choose to let the Texas Federal Court decision stand, (2) appeal the decision, or (3) direct DOL to engage in further rulemaking that is consistent with the Texas Federal Court’s ruling.
While the courts and executive branch debate the minimum weekly salary amounts, it is important for public and private sector employers to review and evaluate their employees’ classifications as exempt or non-exempt from the FLSA’s overtime requirements based on the duties tests. Regardless of what the courts and executive branch determine about exempt employees’ salaries, in order to classify any employee as exempt from the FLSA’s requirements to keep track of hours worked and to pay overtime for all hours worked over forty (40) in a week, the employee must satisfy the Duties Tests of at least one (1) White Collar Exemption, including the Administrative Exemption, Executive Exemption, Professional Exemption, and Computer Employee Exemption. For educational institutions only, the DOL has established two additional exemptions that apply – Teacher Exemption and the Academic Administrator Exemption.
The decision to treat an employee as hourly and, therefore, eligible for overtime is always legally permissible. However, the decision to treat an employee as a salaried employee exempt from the FLSA’s overtime requirements is the employer’s responsibility and, if improper, could create liability for the employer.
Over the years, the Firm’s attorneys have worked with many of our clients to support and advise with regard to exempt and non-exempt employee classification decisions. We stand prepared to assist clients with this important task, regardless of the next steps in the legal and political landscape for the DOL’s new regulations.
