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25 November 2024

Federal court vacates US Department of Labor's increase in the standard salary level for certain employees exempt from overtime pay

On November 15, 2024, a federal judge in the Eastern District of Texas vacated a Department of Labor (DOL) rule that increased the salary threshold for employees exempt from overtime pay under the Fair Labor Standards Act (FLSA). The decision returns the salary threshold to the amount set in 2019 of $684 per week and reverses the first phase of the increase that applied effective July 1, 2024. (Texas v. Department of Labor, No. 4:24-cv-00499-SDJ (E.D. Tex. Nov. 15, 2024)).

Background

In a revised rule governing overtime pay exemptions for executive, administrative and professional employees, the DOL increased the standard salary level and the highly-compensated employee total compensation threshold (the alternative test).

These increases were to initially occur in two phases with the first increase effective July 1, 2024, and the second one effective January 1, 2025. Future updates would occur every three years to reflect current earnings data. (See Tax Alert 2024-1240.)

The district court concluded that because the 2024 rule exceeded the DOL's authority it was unlawful and is vacated.

Ernst & Young LLP insights

This decision could also impact state-specified salary thresholds for exempt employees. For example, Maine rolled back an increase to its salary threshold due to the federal court's ruling. (See Maine Department of Labor announcement).

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Contact Information

For additional information concerning this Alert, please contact:

Workforce Tax Services - Employment Tax Advisory Services

Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor

Document ID: 2024-2153

 

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