Employment Law Update:  Status Update on New FLSA Exemption Salary Threshold

On June 28, 2024, the State of Texas was granted a narrow injunction to block the enforcement of the Department of Labor’s final rule raising the salary threshold for overtime exemptions under the Fair Labor Standards Act (FLSA). This narrow injunction only applies to the State of Texas as an employer; it does not apply to any other employers. Accordingly, all other public and private employers remain subject to the salary threshold increases in the DOL’s final rule.

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, they all utilize a salary basis test and a salary threshold that employees must be paid to be eligible for exemption. To meet the exemption requirements, an employee must meet the salary basis test, the salary threshold, and the job duties test.

Based on the Department of Labor’s final rule, the salary threshold increased on July 1, 2024, and another increase is scheduled for January 1, 2025. However, for the State of Texas as an employer, both updates to the salary threshold were enjoined on June 28, 2024—the business day before the rule became effective. The Texas court granting the injunction is the same court that invalidated the 2016 change to the salary threshold. The court found that the State of Texas was likely to succeed in its claim that the Department of Labor’s new rule exceeded the statutory authority of the Department of Labor because the new rule focused the exemption tests on salary level instead of job duties. The court further cited the newly issued Supreme Court decision Loper Bright Enterprises v. Raimondo, as we reported recently.

This injunction only covers the State of Texas as an employer. On July 1, 2024, another Texas court denied an injunction requested by a private employer in Flint Avenue LLC v. U.S. Department of Labor. This court found that the employer did not show sufficient irreparable harm to justify an injunction. This case is proceeding on the merits, but the updated salary threshold remains effective against the employer.

Takeaway for Employers:

With the exception of the State of Texas as an employer, on July 1, 2024, the first increase to the salary threshold became effective, increasing the salary threshold to $844 per week, or $43,888 annually. 

In addition to the increase on July 1, 2024, the salary threshold is scheduled for another increase on January 1, 2025. This will increase the salary threshold to $1,128 per week, or $58,656 annually.

Any employee whose salary is below the new salary threshold on each increase date will no longer meet the requirements for exemption. 

Employers should review the salary of all of their exempt employees to determine whether their exemptions will be jeopardized by the increased salary threshold on July 1, 2024, and January 1, 2025. Employers should review their individual circumstances to determine whether to (1) increase employee salary to meet the new salary threshold or (2) reclassify the applicable employees as non-exempt and therefore eligible for overtime pay. 

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 sglaser@lglawfirm.com, Laura Ingram at 512.322.5848 or lingram@lglawfirm.com, or Michelle White at 512.322.5821 or mwhite@lglawfirm.com.