On November 15, 2024, in State of Texas v. Dep’t of Labor, the US District Court for the Eastern District of Texas overturned a Department of Labor rule that would have increased the number of employees subject to the Fair Labor Standards Act (FLSA). The rule established by the Department of Labor in April of 2024 increased the minimum salary at which executive, administrative, and professional (EAP) employees are exempt from minimum wage and overtime pay under the Fair Labor Standards Act (FLSA). In their opinion, the court held that the Department of Labor’s 2024 rule should be overturned because it was an unlawful exercise of agency power that went beyond the scope of the authority granted to them by Congress.
Impact of the Ruling
The ruling in State of Texas v. Dep’t of Labor impacts the entire nation because it prevents the Department of Labor’s 2024 rule from going into effect. As a result, the minimum salary threshold reverts back to $35,568 per year for executive, administrative, and professional employees to be exempt from overtime pay. The Department of Labor can still appeal this decision but with the impending change of administration, they are unlikely to do so.
Still, employers should keep in mind that despite this ruling, states are allowed to set a higher minimum salary for exemption than the ones set by federal law. In Massachusetts, an employee has a right to overtime pay if they work more than forty hours in one week and are not on the list of exempted workers. In Rhode Island, the minimum weekly salary for exempt executive employees is $200 per week. However, employers cannot use the exemption unless the employees are paid at least the standard minimum wage if their salaries are computed on an hourly basis.
Practical Takeaways
In light of the court’s ruling law, employers should:
- Review the job descriptions and salaries of your employees to see if they are exempt from the federal standards set forth in the Fair Labor Standards Act.
- Review your state laws regarding overtime pay.