Judge Strikes Down Rule Raising the Minimum Salary for Exempt Employees
A federal U.S. District Court in Texas vacated the U.S. Department of Labor’s 2024 rule that raised the minimum salary for exempt employees to $43,888 annually (or $844 per week), beginning on July 1, 2024. The full opinion is available here.
The 2024 rule also included an automatic minimum salary increase beginning on July 1, 2025, and again on July 1, 2027. The Court invalidated the entire rule, meaning that neither the July 1, 2024, minimum nor the automatic increases scheduled for 2025 and 2027 are in effect. The 2019 version of the rule, 29 C.F.R. § 541.600, is now the mandatory minimum salary for exempt employees, which requires an annual minimum salary of $35,568 (or $684 per week).
The U.S. Department of Labor may appeal the order invalidating the 2019 rule to the 5th Circuit. However, the incoming presidential administration may choose not to continue the appeal. It appears very likely that the District Court’s Order will stand.
What does this mean for employers?
Employers who were planning raises or shifting certain employees to an hourly pay structure may continue to pay otherwise “exempt” employees on a salaried basis. However, Employers should carefully review their compensation agreements currently in effect before making any decisions on future salaries.
Employers must still comply with the other aspects of the overtime exemption test. In addition to being paid a salary equal to or greater than the minimum of $35,586, overtime exemption only applies to executive, administrative, professional, computer, and outside sales employees. A job title alone is insufficient to meet the first part of the overtime exemption test. Each category has specific criteria:
- Executive Duties:
- Primary duty is managing a department or the organization.
- Regularly directs the work of at least two full-time employees (or their equivalent).
- Has authority to hire, fire, or make significant personnel decisions.
- Administrative Duties:
- Primary duty is performing office or non-manual work directly related to management or general business operations.
- Exercises discretion and independent judgment on matters of significance.
- Professional Duties:
- Requires advanced knowledge in a field of science or learning (e.g., law, medicine, accounting) typically acquired through prolonged study.
- Includes creative professionals in arts, writing, or similar fields.
- Computer-Related Duties:
- Involves work as a computer systems analyst, programmer, software engineer, or similar role.
- Primary duties must include software development, testing, or modification, or the application of systems analysis techniques and procedures to determine hardware, software, or system functional specifications.
- This exemption does not include employees engaged in the manufacture or repair of computer hardware or related equipment, or employees whose work is facilitated by the use of computers and computer software programs (e.g., engineers, drafters and others skilled in computer-aided design software) but who are not primarily engaged in computer systems analysis and programming.
- Outside Sales:
- Primary duty is making sales or obtaining orders outside of the employer’s primary place of business.
- No salary threshold applies to outside sales employees.
As the legal and regulatory landscape evolves, both employers and employees should stay informed and prepared for potential changes. Businesses should consult with legal and HR professionals to ensure compliance with current laws and readiness for future developments. If you have questions about overtime exemptions or other employment law matters, please contact our office today to speak with an attorney experienced in state and federal employment laws.
Authors: Attorney Noah Hill and Intern Alex Clark