On November 15, 2024, the US District Court for the Eastern District of Texas vacated the Department of Labor’s (DOL) final rule raising the salary thresholds for being exempt from overtime under the Fair Labor Standards Act (new salary thresholds). The ruling applies nationwide and means that employers do not currently need to increase employee salaries in January 2025 to maintain their exempt status. It also vacates the July 1, 2024, increase.

Previously, bona fide executive, administrative, and professional employees were exempt if they were paid a salary of at least $684 per week ($35,568 annually). The DOL’s final rule increased the threshold to $844 per week ($43,888 annually) on July 1, 2024. The threshold was set to further increase to $1,128 per week ($58,656 annually) on January 1, 2025.

In a recent, related case, the US Court of Appeals for the Fifth Circuit held that, while the DOL may consider salary as an objective measure of employee eligibility for an overtime exemption, the DOL’s authority to do so “is not unbounded.” Thus, the DOL cannot enact rules “that replace or swallow” the exemptions, which occurs when the DOL sets the salary threshold too high. Relying on this holding, the district court in Texas determined that the DOL’s final rule “effectively eliminated” consideration of whether an employee performed exempt duties. Given this, the district court vacated – in other words, nullified – the final rule.

The DOL may appeal the decision to the Fifth Circuit, so the final rule’s fate remains to be seen. However, given the Fifth Circuit’s ruling and the district court’s rationale, combined with a new presidential administration taking office in January 2025, the chances of the rule being revived on appeal seem unlikely.

Click here to read the original alert by Adam Rocco and Michael Griffaton of Ally Law member firm Vorys.