Federal Court Strikes Down Rule Raising Salary Threshold for White Collar Overtime Exemptions

In a significant legal development, the US District Court for the Eastern District of Texas struck down the U.S. Department of Labor's (DOL) latest rule aimed at raising the salary threshold for white-collar overtime exemptions under the Fair Labor Standards Act (FLSA). This decision, issued on November 15, 2024, applies nationwide and has far-reaching implications for employers and employees across the nation.

Background of the Rule

The FLSA mandates that employees must be paid overtime for hours worked beyond 40 in a week unless an exemption applies which may include executive, administrative, and professional (EAP) employees who qualify for the white-collar exemption. To be exempt, these employees must meet three criteria: they must be paid on a salary basis, their primary duties must be exempt from EAP duties, and they must earn a minimum salary.


In April 2024, the DOL issued a final rule to increase the salary threshold for these exemptions. The rule proposed a two-step increase: first, raising the threshold to $844 per week ($43,888 annually) effective July 1, 2024, and then to $1,128 per week ($58,656 annually) starting January 1, 2025. Additionally, the rule included an automatic update mechanism to adjust the threshold every three years.

The Court's Decision

The U.S. District Court for the Eastern District of Texas found that the DOL exceeded its statutory authority with this rule. The court held that the rule effectively created a "salary-only" test for the EAP exemption, which contradicts the FLSA's focus on the duties performed by employees. The court also invalidated the automatic update provision, stating that such changes must be made through formal regulations.


As a result, the salary threshold will revert to the previous level set in 2019, which is $684 per week ($35,568 annually). This decision nullifies both the July 1, 2024 increase and the planned January 1, 2025 increase.

Implications for Employers and Employees

This ruling has significant implications for employers who had already adjusted their payrolls to comply with the now-invalidated rule. Employers are advised to consult with legal counsel before making any changes to employee salaries or exemption statuses. Additionally, employers should be aware that some states have their own salary thresholds that exceed the federal level, including California, New York, and Colorado.

What's Next?

The DOL may appeal this decision to the Fifth Circuit Court of Appeals. However, with the upcoming change in presidential administration, it is uncertain whether the DOL will pursue an appeal or abandon the rule altogether. Employers and employees alike should stay informed about any further developments in this area.


This ruling underscores the ongoing legal and regulatory challenges surrounding overtime exemptions and highlights the importance of staying current with labor laws and regulations.

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