US DOL Updated Overtime Rule Blocked Nationwide
On Friday, November 15, a federal judge in Texas struck down the new federal DOL overtime rule for the Executive, Administrative, and Professional Exemptions under the Fair Labor Standards Act. Effective July 1, 2024, the new rule increased the minimum weekly salary amount from $684 to $844 and was set to increase the minimum weekly salary again on January 1, 2025, to $1,128. The January 1, 2025, salary threshold of $1,128 per week accounts for the 35th percentile of all full-time salaried workers in the South (the lowest wage region). The July 1, 2024, salary threshold of $844 accounted for the 20th percentile of all full-time salaried workers in the South.
The November 15 ruling reverts the minimum salary back to June 30, 202$684 per week ($35,568 annually) for employees classified under the Executive, Administrative and Professional Exemptions. The Highly Compensated Employee Exemption annual salary also reverts back to $107,432.
In the ruling, the judge found the DOL’s new salary threshold was becoming so high it was outpacing the duties test. In addition, the judge determined the DOL did not have the authority to implement automatic salary increases since it would bypass the rulemaking notice and comment period. The DOL could appeal, but with a new incoming administration, this path is unlikely.
So, what does this mean for employers?
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Status Quo. If you have not made or communicated any changes for January 1, you are in luck – simply stay the course. While it’s legally possible to reduce an exempt weekly salary back to the $684 minimum (effective going forward, not retroactive), that is not a likely recommended move from an employee relations perspective. The salary requirements are only a minimum, and you can always pay more.
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Understand state laws around notice periods when you decrease pay. In NC, all employers must do this in writing at least one full pay period in advance. For SC employers with five (5) or more employees, you are required to provide a seven (7)-calendar day written notice in advance. VA employers must also provide advanced notice to employees, although there is not a specific notice period required.
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Change job classifications. If you moved someone to a non-exempt status because of their salary, you may now move them back to exempt status based on the $35,568 minimum.
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This is also still a good time to review all your job descriptions and classifications. Catapult is a trusted and go-to resource for this type of project. Email info@letscatapult.org and learn how we can help today.
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Reduce salaries. While it’s strongly advised against reducing salaries that were increased for the July 1 deadline, there is more leeway if you have already communicated but not implemented a January 1st increase. Still, consider this carefully as it will affect employee morale and trust.
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Budget Options. This is a time to revisit your 2025 payroll budget. You might be able to make adjustments to salaries at lower rates than originally planned as there is currently no increase required for 2025. Consider what, if anything, you have already communicated about potential increases.
If you need specific guidance or hands-on assistance with any of the above, contact a member of our HR Advice Team.
Written by Catapult HR Advisors Stephanie Dillon, PHR, SHRM-CP and Linda Hunter, and Soule Employment Law Firm Attorney Mimi Soule.
