**UPDATE** Increased Salary Threshold for Exempt Employees Blocked by Texas Court

By Robert Showers Esq. and Justin R. Coleman, Esq.

On November 15, 2024, the United States District Court for the Eastern District of Texas overturned the US Department of Labor’s (DOL) rule to increase the salary threshold for exempt employees. As identified in our original article (https://www.simmsshowerslaw.com/salary-threshold-for-exempt-employees-to-increase/), the DOL increased the minimum annual salary for an “executive, administrative, or professional” (EAP) employee to be exempt from overtime pay. These increases were to occur on July 1, 2024, January 1, 2025, January 1, 2027, and then every three years thereafter. The State of Texas sued the DOL claiming that the increases were unlawful and that the DOL had acted beyond its original scope of authority.

The US District Court agreed with the State of Texas. After reviewing the history of the EAP exemption and the legislative language behind its enactment by Congress, the Court ruled that the “salary” prong of the test was enacted to be a “dividing line” between exempt and non-exempt employees but that the salary amount cannot and does not replace the “duties” prong of the test. In reviewing the proposed salary increases under the DOL’s rule, the Court found that the “salary” prong effectively replaced the “duties” prong. The rule created or would create situations where approximately one-third of employees whose duties and responsibilities had not changed would overnight go from exempt to non-exempt simply because their salary was not the right amount.

In short, the key parts of the ruling:

• The July 1, 2024, increase to $43,888 and the planned January 1, 2025, jump to $58,656 have been blocked.
• The court ruled that the DOL rule making the salary level the focus for exempt status qualification instead of job duties, exceeded the DOL’s authority under the federal statute.
• The automatic updates to the salary thresholds every three years under the DOL rule are also invalidated.

The minimum annual salary threshold for the executive, administrative, and professional exemptions reverts to $684 per week ($35,568 annual salary).

The DOL could still appeal the District Court’s ruling to the Fifth Circuit. However, an appeal is unlikely since a new executive administration will take over in January 2025. We will continue to monitor this matter and provide any further updates.

If you are an employer, we would recommend that you wait to make further employee salary decisions until the DOL announces what actions, if any, it will take. However, we would still recommend that non-profit and for-profit employers work with knowledgeable legal counsel to review their current employee job descriptions and agreements for compliance with current FLSA standards as well as your state’s employment laws regarding exempt employees.

Disclaimer: This memorandum is provided for general information purposes only and is not a substitute for legal advice particular to your situation. No recipients of this memo should act or refrain from acting solely on the basis of this memorandum without seeking professional legal counsel. Simms Showers LLP expressly disclaims all liability relating to actions taken or not taken based solely on the content of this memorandum. Please contact Robert Showers or Justin Coleman for specific legal advice on this issue for your needs.