Employers can breathe a sigh of relief. A Texas federal judge has blocked the U.S. Department of Labor’s increase in the salary threshold for “white-collar” or executive, administrative, and professional employees who are otherwise exempt from overtime. Read on to learn what this means for employers and employees. 

What happened? 

The now-vacated rule raised the salary threshold for overtime eligibility from $35,568 to $43,888 per year on July 1, 2024, and again to $58,656 per year on January 1, 2025. This would have made many more workers eligible for overtime pay. 

But U.S. District Judge Sean Jordan put the brakes on these changes. His reasoning? The Department of Labor overstepped its authority by focusing too heavily on salary levels instead of the actual duties’ employees perform. Sound familiar? That’s because similar attempts during the Obama administration faced the same fate in court. 

What does this mean for employers? 

If you’re running a business, you’ve probably already faced more than enough regulatory twists and turns. Here’s why this latest development doesn’t need to keep you up at night: 

1. No immediate changes:  For now, the federal salary threshold stays at $35,568 per year. This means you don’t have to adjust your pay structure or reassess overtime eligibility. Keep in mind that your states or city’s salary threshold already may be higher, like New York City’s at $62,400 per year.  

2. Already made changes:  If you already increased salaries based on the July 1, 2024, threshold increase, be wary of now reducing those salaries. While you’re not prohibited from doing so – provided you give enough notice – employee morale will take a hit. 

3. Plans on hold? No problem:  If you were going to wait until January 1, 2025, to increase salaries and have already communicated that to your employees, it’s okay to take a step back. Just be transparent with them about your decision. 

Let’s talk strategy 

What can you do now? Consider these proactive steps: 

• Audit pay practices:  Take this opportunity to ensure you’re meeting existing federal and state wage and hour requirements. The blocked rule doesn’t mean you don’t have to comply with current law regarding the duties tests for white-collar employees. In addition, some states and cities, like New York, have higher thresholds than federal law. 

• Stay in the loop:  While it is unlikely this rule will be resuscitated in the near future, a more moderate increase in the salary threshold may occur. That’s what happened during President-elect Trump’s first administration after the Obama administration’s rule was struck down. So, keep your eye on any new developments in this area, whether under federal or state law. 

The blocked rule may feel like déjà vu for those who remember past battles on overtime pay. For employers, the key takeaways are:  Ensure your pay practices are compliant with current law, communicate openly with your team, and keep your eye on any new developments. 

Need guidance navigating wage and hour compliance? That’s where we come in. Contact us at 973.787.8442 or schedule a Strategy Session today. 

DOL increased the salary threshold for exempt employees

This blog is for informational purposes only. It is not offered as legal advice, nor is it intended to create an attorney-client relationship with any reader. Consult with competent local employment counsel to determine how the matters addressed here may affect you.