Texas Federal Court Strikes Down DOL's Proposed Minimum Salary Increases for Exempt Employees

On November 15, 2024, a Texas federal court struck down a U.S. Department of Labor (DOL) rule that aimed to raise the minimum salary for employees classified as exempt from overtime and minimum wage requirements under the Fair Labor Standards Act (FLSA). This decision invalidates the rule nationwide, effective immediately.

The rule, initially proposed by the DOL on April 23, 2024, included two phases of salary increases:

1. Phase 1 (July 1, 2024): Raised the salary from $684 per week ($35,568 annually) to $844 per week ($43,888 annually).

2. Phase 2 (January 1, 2025): Planned a further increase to $1,128 per week ($58,656 annually).

The rule also proposed increases for Highly Compensated Employees (HCEs), raising their salary thresholds from $107,432 annually to $132,964 in July 2024, with a second increase to $151,164 in January 2025. Additionally, the rule would have implemented automatic salary updates every three years.

However, the court ruled that the DOL exceeded its authority, stating that the DOL could not replace the duties test with an overly dominant salary-level test. The court also blocked the automatic updates every three years.

As a result of the ruling, the salary thresholds for exempt employees revert to their previous levels:

• $684 per week ($35,568 annually) for executive, administrative, and professional employees.

• $107,432 annually for HCEs.

The DOL could appeal the decision, and an appeals court could either uphold or reverse the ruling. Employers who adjusted salaries based on the now-blocked rule may need to reassess their compensation levels and consult legal counsel. States with stricter exempt status tests may still impose their own rules, so employers should check both federal and state criteria. Additionally, employers should be prepared to communicate any changes to employees promptly and in writing, considering state and local regulations on pay change notifications.

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