Under the Fair Labor Standards Act (“FLSA”), most employees are entitled to be paid at least the federal minimum wage for all hours worked and overtime pay (at a rate not less than 1.5 times the regular rate of pay) for all hours worked in excess of 40 hours in a single workweek.
There are, however, various circumstances when an employee may be “exempt” from the minimum wage and overtime requirements of the FLSA. For example, and with some exceptions, an employee may be classified as “exempt” when the following two tests are met: (1) the employee performs the specified duties of an executive, administrative, or professional employee as defined in the FLSA regulations (the “Duties Test”); and (2) the employee is paid on a salary or fee basis at a rate not less than the minimum salary level designated by the Department of Labor (the “Salary Test”).
Earlier this year, the Department of Labor made changes to the minimum salary required for such employees to meet the Salary Test. Specifically, under the DOL’s 2024 Rule, the minimum salary for exempt employee status increased from $684/week to $844.00/week effective July 1, 2024, and was set to increase to $1,128.00/week effective on Jan. 1, 2025. The Rule also provided for automatic increases every three years.
In an Opinion issued on Nov. 15, a federal judge in the Eastern District of Texas held that the DOL exceeded its authority in issuing the 2024 Rule and its related increases to the minimum salary threshold for exempt executive, administrative, and professional employees. Accordingly, the Court entered a summary judgment vacating the DOL’s 2024 Rule. This ruling applies nationwide and strikes down the upcoming Jan. 1 salary increase and future automatic increases, as well as the prior increase that had taken effect on July 1, 2024.
With this ruling and the overall complexities that come with employee classifications under the FLSA, Employers should review both the job duties and salary levels of its current employees to determine proper exempt status classification.
