Earlier this year, we reported on the United States Department of Labor Final Rule that increased the salary threshold for the “white collar” overtime exception under the Fair Labor Standards Act.  As we’d predicted, a District Court in the Eastern District of Texas has stepped up to vacate the rule.

For those who don’t recall, in July, the minimum salary to be exempt from overtime was increased to $844 per week or $43,888 per year.  On January 1, 2025, the minimum salary was set to rise to $1,128 per week, or $58,656 per year.  In addition, beginning in July 2027, and every three years after that, the minimum salary was to be adjusted based on available data at the time of the adjustment.

In its decision, the court held that the Department of Labor created a “salary only” test for the white collar exemption, when it is actually a three factor test, as described below.  The court also found that the future increases that the DOL created were in excess of the DOL’s authority, as future increases would have required additional rulemaking under the Administrative Procedures Act.

As a reminder, to fall within the EAP exemption, an employee must meet three tests:

1. be paid a salary, meaning that they are paid a predetermined and fixed amount that is not subject to reduction because of variations in the quality or quantity of work performed;
2. be paid at least a specified weekly salary level; and
3. primarily perform executive, administrative, or professional duties, as provided in the Department’s regulations.

With this ruling, the overtime threshold returns to $684 per week, or $35,568 per year.  You can be sure there won’t be any changes made to the rule in the next four years, unless Congress decides to step up and increase the minimum.  Given the upcoming changes to the presidential administration, the chances of appeal of the ruling are slim to none.

For those who increased their employee wages in July of this year in order to avoid the payment of overtime, it’s probably too late to change any wages for your employees.  Before making any changes, you should strongly consider the impact of what rescinding any raises handed out in light of the regulation might have on your workforce.  However, if you were planning on increasing wages in 2025 to comply with the law, you can pump the brakes (unless you’d like to attract and retain better employees).

If you, or your organization, need assistance in making sure you are compensating your employees correctly in light of the recent decision, contact Wiley Reber Law, for legal advice that works.