Webinar Recap | Final Answer On The DOL Minimum Exempt Salary Rule

In this pre-Thanksgiving webinar, Adams Keegan’s Charles Rodriguez and Brandon Roland discussed how to prepare for the next minimum exempt salary threshold increase from $43,888 to $58,656, which is slated to take effect on January 1, 2025. They also talked about essential insights, updates, and answers to questions about how employers can develop their communication and implementation strategy and ensure accurate employee classification, even for employees who will meet the new salary threshold.

Did you miss it on November 20? View the full webinar here.

What the 2024 final rule was about

The U.S. District Court for the Eastern District of Texas recently delivered a significant ruling on the Department of Labor’s (DOL) 2024 Minimum Exempt Salary Rule under the Fair Labor Standards Act (FLSA). The FLSA requires employers to pay overtime to employees working over 40 hours per week unless they qualify for exemptions, such as the "white-collar" exemption for executive, administrative, and professional (EAP) workers. 

To qualify, employees must meet three criteria:

• Salary basis test: Be paid a fixed salary regardless of hours worked.

• Duties test: Perform exempt EAP duties.

• Salary threshold test: Earn a minimum salary.

In April 2024, the DOL introduced changes that increased the salary threshold for exempt workers to $43,888 annually on July 1, with a further increase to $58,000 set for January 1, 2025. The new rule also included automatic escalations every three years. However, the duties test for EAP workers remained unchanged.

U.S. District Court for the Eastern District of Texas decision

On November 15, 2024, the U.S. District Court for the Eastern District of Texas invalidated the DOL's rule entirely. The court held that the salary increases were so high they effectively created a “salary-only” test, overshadowing the duties test specified in the FLSA. Additionally, the provision for automatic escalations violated the Administrative Procedure Act by bypassing required notice-and-comment procedures for rulemaking. This decision retroactively nullifies the July 1, 2024, threshold increase and prevents the January 1, 2025, hike from taking effect.

The ongoing importance of proper employee classification

Accurate employee classification under FLSA exemptions is crucial for employers. Misclassifying employees as exempt when they do not meet the criteria can result in significant back pay liabilities, penalties, and reputational damage. While the court’s ruling provides temporary clarity, employers must remain vigilant in adhering to the established 2019 threshold of $35,568 annually, or $684 per week, for exempt employees.

The ruling also underscores the importance of the duties test, which evaluates the nature of an employee's work. Employers should periodically review job descriptions and roles to ensure compliance with exemption criteria, irrespective of salary adjustments.

What happens next for employers?

For now, employers must revert to the pre-July 1, 2024, salary threshold of $35,568 annually. The DOL may attempt to introduce a revised rule in the future, but any new regulation will likely require compliance with stricter procedural safeguards.

Employers who raised salaries to comply with the now-vacated rule can choose to maintain those increases or reevaluate based on business needs. However, any adjustments should be communicated clearly to affected employees to avoid confusion or morale complications.

The broader takeaway is that wage-and-hour compliance remains a fluid area of law. Employers should stay informed on regulatory updates and consult legal or HR professionals to mitigate risks as these rules continue to evolve.

By understanding the implications of this ruling and maintaining proper employee classification, employers can navigate the shifting landscape of labor regulations with confidence.

View the recording here and give yourself about 25 minutes to take a deep dive into the discussion.