Nov 18, 2024

Federal Court Strikes Down Overtime Rule

With a November 2024 decision that overturns major employment changes announced in April 2024, a federal court has ruled against the Department of Labor. Click through for a review of the current overtime status in the wake of this decision.

The Department of Labor announced in April 2024 that it would increase the salary threshold required to exempt a salaried bona fide executive, administrative or professional employee from federal overtime pay requirements. According to a DOL release, "Effective July 1, 2024, the salary threshold will increase to the equivalent of an annual salary of $43,888 and increase to $58,656 on Jan. 1, 2025." In April, the annual salary threshold was $35,568. The release further stated, "Starting July 1, 2027, salary thresholds will update every three years by applying up-to-date wage data to determine new salary levels."

But that is no longer effective. As the National Law Review reported, "On Nov. 15, 2024, Judge Sean D. Jordan of the United States District Court for the Eastern District of Texas ruled that the DOL exceeded its rulemaking authority by raising the minimum salary for exemption as an executive, administrative, or professional (EAP) employee under the Fair Labor Standards Act."

So, where are we?

The entire DOL rule seems to be gone, including the upcoming January increase and the three-year plan. Especially interesting is that the July raise has also been retroactively rolled back. In theory, employers that granted increases based on that change could now cancel those salary changes. However, such reductions may lead to employee resentment, so they may not be worth any savings.

Also, for many employers the issue may be moot: Some state and local jurisdictions already have higher salary thresholds in place, and this federal ruling has no effect on them.

The ink on the ruling is still wet, and lawyers are currently reviewing the lengthy ruling. We'll have more guidance as it becomes available. For now, the best advice is not to make any changes until you've spoken with qualified advisors.

©2024