Employment Law Update:  Status Update on FLSA Exemption Salary Threshold

Author: Michelle White, Associate Attorney

On November 15, 2024, the Department of Labor’s (DOL) final rule to increase the salary threshold for overtime exemptions under the Fair Labor Standards Act (FLSA) was vacated by the Eastern District of Texas.

Under the FLSA, employees may be exempt from overtime pay if they meet specific requirements related to job duties and salary requirements, as defined in the FLSA and FLSA regulations. These exemptions include the executive, administrative, and professional exemptions. While the duties requirements vary between these exemptions, most FLSA exemption tests also utilize a salary basis test and a salary threshold that employees must be paid to be eligible for exemption. To meet the FLSA exemption requirements, an employee must meet the salary basis test, the salary threshold, and the job duties test.

As reported earlier this year, the Department of Labor issued a final rule to increase the salary threshold for overtime exemptions under the Fair Labor Standards Act (FLSA) in multiple steps. Prior to the increases, the salary threshold was $684 per week, or $35,568 annually. Based on the DOL’s final rule the salary threshold increased to $844 per week, or $43,888 annually, on July 1, 2024. On January 1, 2025, the second increase was scheduled to become effective, raising the salary threshold to $1,128 per week, or $58,656 annually. Further, the salary threshold would be subject to automatic increases every three years beginning in 2027.

In the decision to vacate the final rule, the Eastern District of Texas held that the extent of the increase was beyond the authority of the DOL because it placed too much emphasis on the salary test instead of the applicable duties test. The court invalidated (1) the upcoming increase in January 2025, (2) the previous increase in July 2024, and (3) the automatic every-three years increase starting 2027. Due to this decision, the salary threshold reverts to the previous level of $684 per week, or $35,568 annually. 

Takeaways for employers:

Effective November 15, 2024, the salary threshold for an exempt employee reverted back to $684 per week, or $35,568 annually. Employers contemplating increases in salary or exempt status to comply with the upcoming January 2025 increase are no longer obligated to do so. Employers who made changes to employee pay or exempt status to comply with the July 2024 increase should consult with an attorney before determining whether to revoke these changes moving forward. While employers are no longer bound by either increase, employers may want to consider other factors such as employee morale, individual business needs, market factors, and state law requirements.

If you have any questions related to this announcement or other employment law matters, contact Sarah Glaser, Chair of Lloyd Gosselink’s Employment Law Practice Group, at 512.322.5881 or the Lloyd Gosselink attorney with whom you usually work.