November 26, 2024
DOL Appeals Federal Judge’s Ruling That Blocked Overtime Rule
UPDATE: The article below was posted November 15, 2024. On November 26th the U.S. Department of Labor filed an appeal. Stay tuned as this story develops.
A federal judge in Texas has struck down the overtime rule issued by the U.S. Department of Labor (DOL). The rule took effect July 1st and raised the salary threshold for overtime eligibility from $684/week to $844/week. The next increase was scheduled for January 1, 2025, and would have increased the minimum threshold to $1,188/week. Future increases were also scheduled for every three years beginning July 1, 2027.
Why? The judge ruled that the DOL rule was an “unlawful exercise of Agency power.”
How? Remember that to properly classify an employee as exempt, the employee must meet three tests: the minimum salary level, a salary basis test, and a duties test. “[T]he minimum salary level imposed by the 2024 Rule ‘effectively eliminates’ consideration of whether an employee performs ‘bona fide executive, administrative, or professional capacity’ duties in favor of what amounts to a salary-only test.”
Impact? The threshold for overtime eligibility will now revert to $684/week.
Options? Many employers already increased some employees’ minimum salary to at least $844 week to preserve their exempt status. Others converted exempt employees to non-exempt. What now? For the former, some might reduce the minimum salary to what it previously was. Others might freeze the increased salary for some period of time. Employees who were converted to non-exempt might be converted back to exempt. Some might leave everything as is.
Whatever options you choose, these or others, carefully consider the impact to employee relations as well as any legal implications. Also, consult with your company’s employment counsel on compliance with state rules that may be stricter than the federal rule.
