Beginning July 1, 2024, the Department of Labor (DOL) enforced a new rule requiring employers to meet a higher salary threshold to classify employees as exempt.
Legal Challenges Against the Rule
A Win for Texas: A recent court order has exempted Texas from complying with the new federal minimum salary threshold for exempt workers that took effect on July 1, 2024. This ruling, issued on June 28, applies solely to state-employed workers in Texas, following a lawsuit arguing that the Department of Labor (DOL) exceeded its authority with the new salary regulations. The court’s decision is specific to Texas state employers due to the state’s unique legal challenge and does not impact private employers in Texas or employers in other states.
What Does This Mean for Employers In Other States?
Employers will have to comply with the new salary requirements until a court says otherwise. Here’s a brief recap of the new rule:
Under the federal Fair Labor Standards Act (FLSA), employees generally must be paid an overtime premium of 1.5 times their regular rate of pay for all hours worked beyond 40 in a workweek — unless they are exempt.
How Do I Determine Exemption?
To qualify an employee as exempt under the executive, administrative, and professional (EAP) criteria, employers must prove the following:
- Salary Basis Test: The employee earns a fixed salary that does not vary with the quantity or quality of work.
- Salary Level Test: The salary meets or exceeds the specified minimum amounts.
- Duties Test: The employee’s primary job duties must involve executive, administrative, or professional tasks as defined by the DOL.
Options for Compliance
Employers facing these new regulations have two main options:
- Increase the salaries of affected employees to meet the new thresholds.
- Reclassify employees as non-exempt, making them eligible for overtime pay at 1.5 times their regular rate of pay.
Implementation Dates
The new salary thresholds will be implemented in two phases:
- Phase 1: July 1, 2024 – The minimum salary requirement will be raised to $884 weekly ($43,888 annually).
- Phase 2: January 1, 2025 – The requirement increases to $1,128 weekly ($58,656 annually).
Ongoing Legal Challenges:
Employers should stay alert to further legal developments, as additional lawsuits and appeals may influence the future enforcement of these rules. The situation remains dynamic, and changes could arise affecting the implementation timeline.
Continued Monitoring:
Pinion’s TalentPro HR services teams will continue to monitor developments from the courts and the DOL’s Wage and Hour Division, so stay tuned for further updates.
For more information on how to navigate these changes or to discuss your company goals and challenges, connect with a Pinion HR consultant.
