Federal Court Strikes Down DOL’s 2024 Exempt Salary Rule

On November 15, 2024, a federal court in Texas ruled that the Department of Labor (DOL) overstepped its authority with the latest rule increasing the minimum salary for exempt employees. As a result, the July 1, 2024, salary threshold increases are void, the planned January 1, 2025, increases won’t take effect, and the automatic triennial increases scheduled for the future have been eliminated.

In essence, the entire rule has been struck down, and the minimum salary thresholds have reverted to their pre-July 1, 2024, levels. This decision means that most executive, administrative, and professional employees must now be paid at least $684 per week ($35,568 annually), rather than the $844 per week mandated by the now-defunct rule. Similarly, employees classified under the highly compensated employee (HCE) exemption must earn at least $107,432 per year, not the $132,964 outlined in the 2024 rule.

What Employers Need to Know

With this decision, employers may choose to adjust their payroll practices accordingly.

Here’s what you need to consider:

1. Rolling Back Changes

• Employers can reverse any changes made in response to the July 2024 salary rule.

• Employers can also pause plans for the second increase that was set to take effect in January 2025.

• Important: Retroactively reducing pay or reclassifying employees is not allowed.

2. Communication with Employees

• Employees must be notified of any changes to their pay or job classification before those changes go into effect.

• Ensure compliance with state or local laws, which may have specific requirements for providing notice about pay or classification changes.

3. Maintaining Employee Morale

• Pay reductions or reclassifications could impact employee morale. Employers should be proactive in addressing concerns.

• Transparency is key: Explain that the changes are a direct result of shifting federal regulations and business needs, making it clear that decisions are not arbitrary.

The Bigger Picture

This ruling highlights the unpredictable nature of employment law and the importance of staying informed. Employers must remain flexible while balancing compliance with federal, state, and local regulations. While the rollback may alleviate financial pressure for some businesses, clear communication and thoughtful implementation of any changes are essential to maintaining trust and minimizing disruption in the workplace.