On November 15, 2024, the United States District Court for the Eastern District of Texas in State of Texas v. United States Dep’t of Labor held that the U.S. Department of Labor (DOL) exceeded its rulemaking authority when it released its updated federal overtime rule in April 2024 increasing the minimum salary for exemption as an executive, administrative, or professional (“EAP”) employee under the Fair Labor Standards Act from $684 per week ($35,568 annualized) to $844 per week ($43,888 annualized) effective July 1, 2024 and to $1,128 per week ($58,656 annualized) effective January 1, 2025. The DOL’s new rule also increased the minimum total annual compensation level for exemption as a “highly compensated employee” (i.e., one who customarily and regularly performs any one or more of the exempt duties or responsibilities of an EAP employee) and provided for automatic triennial increases in the minimum compensation levels for exemption beginning on July 1, 2027.
The Court’s November 2024 decision declared the DOL’s rule an “unlawful exercise of agency power” and vacated it nationally. The DOL filed an appeal with the United State Court of Appeals for the Fifth Circuit. However, after President Trump took office, the DOL requested a 30-day extension of time, through March 7, 2025, to file its opening brief on appeal. We do not anticipate that the DOL will make future filings under the Trump administration challenging the DOL’s authority; perhaps at most there will be a stipulation withdrawing the DOL’s appeal.
Beginning July 1, 2027, and every three years thereafter, the DOL will implement further increases in the minimum salary for exemption as an EAP employee and the minimum annual compensation level for exemption as a highly compensated employee, tied to current earnings data. Employers should determine which employees will be impacted by the new thresholds, consider whether they will increase their salaries to the new minimum or reclassify them to overtime-eligible, and if they do reclassify certain employees to overtime-eligible, consider their supervisor’s management of the overtime costs and have a clear understanding of what hours are considered “hours worked”. If you have any questions about the subject of this article and its implications for your business, please contact your Forework HR representative.