Great Lakes Wire

On Monday, the U.S. Department of Labor’s (DOL) final rule changing the salary level test from $684/week to $844/week took effect as scheduled. This rule is being challenged in several Texas federal courts. It was hoped by some that one of those court decisions would result in the issuance of an injunction for the entire United States. However, in one case, the injunction issued on Friday only impacts State of Texas public employees. In the second case, the court declined to issue an injunction at all (State of Texas v. United States Department of Labor).

This means that the U.S. Department of Labor’s final regulations increasing the exempt salary level test went into effect Monday, July 1st for employers in the rest of the United States.

Pursuant to these DOL regulations, in addition to the requirement that employees classified as exempt are paid only on a salary basis and also meet the job duties test, employers that classify employees as exempt must also meet the salary level test. This is also known as the “White Collar” exemption tests.

The salary level test applicable to Executive, Administrative, or Professional exemptions (EAP) as of July 1st requires payment of a base salary of at least $43,888/year, up from $35,568/year, to meet those exemption test requirements.

If you have exempt classified employees that now make under $43,888, they would now have to be treated as non-exempt or their salary would need to be increased above $43,888/year to maintain exempt status. Changing to non-exempt status means recordkeeping on hours worked and overtime paid at time and one-half for hours worked over 40 in a week.

This new salary level will be in effect until December 31, 2024 when it will increase to $1,128/week or $58,656/year. Under these new regulations, the salary level will then automatically increase every three years.

Changes to the salary level test are estimated to make up to 1 million employees across the United States non-exempt. When it increases again this upcoming January another 3 million employees may become non-exempt.

In a case decided on Monday a federal judge found that Flint Avenue LLC had not met its “burden of showing irreparable harm that would justify the extraordinary remedy of injunctive relief.”

This leaves one more case challenging DOL’s exempt classification rules at this stage: Plano Chamber of Commerce v.U.S. Department of Labor in Eastern District Texas. This case raises similar arguments that were successful when Obama-era Exempt Salary Level rules were challenged back in 2016.

ASE will continue following developments around FLSA exemption tests.

Sources: Warner Norcross + Judd eAlert Court Enjoins FLSA Salary Threshold Increase – But Only for Employers of State Texas; Ogletree Deakins Texas Federal Court Delays Effective Date DOL’s New Overtime Rule As Applied Texas Employer (6/29/2024); Law360 Employment Authority DOL’s Overtime Rule Survives Texas Marketer’s Injunction Bid (7/1/2024)

By Michael Burns courtesy SBAM-approved partner ASE

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