Final ruling on the DOL’s 2024 Minimum Exempt Salary Rule: Next steps for employers

Recently, a federal court in Texas has nullified the Department of Labor’s (DOL) 2024 Minimum Exempt Salary Rule under the Fair Labor Standards Act (FLSA). This includes the July 1, 2024, increase from $35,568 to $43,888 annually as well as the planned hike to $55,068 on January 1, 2025.  For employers who are navigating the fallout of this decision, here are some steps to consider to maintain compliance and employee expectations.

The Texas Court’s decision

On November 15, 2024, the U.S. District Court for the Eastern District of Texas determined that the DOL’s 2024 rule exceeded the agency’s authority. At the center of the issue was the salary threshold’s alignment with job duties – a cornerstone of the exemption criteria. The court found that the rule placed an undue emphasis on salary rather than focusing on whether employees meet the “duties test” for exempt status. The court specifically rejected the July increase to $43,888 and the planned January 2025 threshold of $55,068. As a result, the court has reverted back to the 2020 threshold of $35,568 annually, or $684 per week.

What this means for employers

Employers no longer need to meet the proposed $55,068 salary threshold for exempt employees in 2025, but the ruling has created uncertainty in several key areas. First, the existing salary threshold of $35,568 remains valid, and employers must continue to ensure compliance with this requirement. Additionally, although unlikely, the DOL may appeal the decision, potentially leading to further legal challenges and policy shifts. 

Finally, some organizations may have already communicated or implemented salary adjustments in anticipation of the 2024 rule. Reversing these changes could require careful consideration to avoid harming employee trust. It’s also important to note that some states require employers to give a certain amount of notice before reducing pay.

Next steps

While the court’s ruling may provide short-term relief for some organizations, it’s crucial to remain proactive in managing compliance and workforce expectations. 

1. Evaluate compensation strategies

If you’ve already made adjustments to employee salaries to prepare for the 2025 effective date, assess the financial and operational impacts of maintaining these adjustments. While there’s no legal requirement to proceed with salary increases, doing so could improve employee retention and morale.

2. Revisit job classifications

Exempt employees must meet both the salary and duties tests to qualify for exemption. With the salary threshold remaining at $35,568, ensure that your exempt employees also meet the duties criteria outlined under the FLSA.

3. Communicate with employees

If your organization communicated potential salary adjustments tied to the now-blocked rule, it’s important to address the change openly and transparently. Start by clarifying how the court’s decision impacts any previous plans and emphasize your commitment to fair pay and compliance with existing regulations. Additionally, offer clear avenues for employees to raise questions or concerns about the situation. Taking a transparent approach can help maintain trust among your workforce and minimize confusion.

4. Monitor legal developments

The Texas court’s decision may not be the final word on this issue. Employers should keep a close eye on any appeals or new regulatory efforts by the DOL. Partnering with an HR expert can help you stay informed and prepared for potential changes.

Considerations for multi-state employees

Employers with multi-state workforces must navigate varying salary thresholds, as many states have already established higher exempt salary requirements. For example, states like Alaska, California, Colorado, Maine, and Washington have thresholds exceeding the federal level. 

In New York, the salary threshold will increase from $62,400 to $64,350 annually starting January 1, 2025. As federal rulemaking ebbs and flows, more municipalities may follow suit by implementing their own salary standards. Employers should closely monitor these regional changes to certify ongoing compliance across all jurisdictions where they operate.

By staying informed, reviewing internal policies, and fostering open communication with employees, employers can navigate this challenging landscape while positioning themselves for compliance.

If you have questions about how the court’s ruling impacts your organization or need help planning your next steps, contact an Adams Keegan representative to ensure your strategies align with current regulations and long-term workforce goals.