FLSA salary rule vacated

Late Friday, a federal District Court Judge in the Eastern District of Texas vacated the 2024 final rule previously announced by the Department of Labor. That ruling saw the first increases to the salary basis requirement in decades. Now, the FLSA salary basis reverts to pre-2024 levels.

The 2024 Rule included three different increases. The first, which already took effect on July 1, 2024, increased the minimum salary basis for an EAP exemption from the former level of $684/week ($35,568 annual) to $844/week ($43,888 annual). The second planned increase of the 2024 Rule, which was scheduled to take effect on January 1, 2025, would have increased the salary basis from $844/week to $1,128/week ($58,656 annual). The 2024 Rule further specified that the salary basis would increase triennially thereafter based on contemporary earnings data, with the first triennial increase scheduled to take effect on July 1, 2027.

Now, all of those increases have been struck down by the Eastern District of Texas as unlawful. The District Court’s vacatur includes a roll back of the July 1, 2024 increase that had already taken effect nationally, but which is now vacated along with the entirety of the 2024 Rule. This means that there is no longer an increase to the salary basis for the EAP exemptions in 2024, and the salary basis for those exemptions, as of today, reverts to the pre-2024 Rule level of $684/week ($35,568 annual).

The District Court wrote at length about the historical basis and framework for setting a salary threshold, holding that the salary basis was historically intended to be “deliberately low” merely to weed out those who obviously would not meet the duties test for exemption and that the salary basis standard was never intended to replace the duties based portion of the test. The District Court held that the Department of Labor deviated from this historical framework beginning with its 2004 rule and determined that the 2024 Rule constituted an unlawful agency action.

Employers who have been analyzing courses of action moving forward can pause (for now). While the DOL is likely to appeal this decision, it is doubtful that the appeal would be heard before January 1, 2025. It is additionally unlikely that in 2025, President-elect Trump’s administration would support the DOL’s continued attempts at enforcement of the regulation in the new administration. This does not, however, mean that the work done in analyzing positions under the regulation is without value. In many cases, an annual review of the duties test of an employer’s exempt workforce is valuable to confirm that the individuals remain appropriately categorized as exempt.

The duties test requirements are outlined in Chapter 3 of the Employment Law Guide (aka WCI Desk Manual). You can find it here (log-in required).

Source: WCI staff