Federal Overtime Rule Overturned: What Employers Need to Know
On November 15, 2024, the U.S. District Court for the Eastern District of Texas voted to overturn the 2024 Department of Labor (DOL) Overtime Rule. This decision impacts employers across industries, rolling back salary thresholds for exempt employees and nullifying planned increases. Understanding the implications of this ruling is critical for maintaining compliance and effectively managing your workforce.
What Did the Ruling Change?
The now-overturned 2024 rule proposed significant changes to salary thresholds for exempt employees under the Fair Labor Standards Act (FLSA):
- White-collar exemptions were to see a minimum salary increase from $684 per week ($35,568 annually) to $844 per week ($58,656 annually) starting January 1, 2025.
- Highly compensated employee exemptions would have risen from $107,432 to $132,964 annually.
- Automatic increases to salary thresholds every three years were also introduced.
The court invalidated the rule, stating that the dramatic salary increases undermined the duties test for white-collar exemptions and violated procedural requirements under the Administrative Procedure Act.
Current Salary Thresholds
With the rule vacated, the salary thresholds revert to the pre-July 1, 2024, levels:
- Executive, administrative, and professional employees: $684 per week ($35,568 annually)
- Highly compensated employees: $107,432 annually
Employers who adjusted salaries or classifications based on the 2024 rule may roll back those changes. However, any modifications should be communicated to employees and comply with applicable state or local notice requirements.
Why Reviewing Classifications Still Matters
Despite this ruling, it’s still essential to periodically review employee classifications for exempt and non-exempt status. Job responsibilities and industry dynamics are constantly evolving, especially with the growing influence of artificial intelligence and technology-driven changes. Ensuring classifications align with employees’ actual duties and comply with current laws helps mitigate legal risks and supports a productive workforce.
Action Steps for Employers
To ensure compliance and maintain positive employee relations, consider the following:
- Audit employee classifications for exempt and non-exempt status to ensure they align with duties and salary requirements.
- Communicate any changes in pay or classification to employees following state or local laws regarding advance notice.
- Prepare for potential future changes, as federal laws and regulations may continue to evolve.
We’re Here to Help
Navigating labor law changes can be complex, but you don’t have to do it alone. Our HR consulting team specializes in helping businesses stay compliant while adapting to legal shifts. Whether you need assistance with employee classification reviews, compliance audits, or proactive planning, we’re here to provide expert guidance tailored to your organization’s needs.
Contact a KerberRose Human Resources advisor today to ensure your workforce policies are aligned with best practices and ready for the future.
