Court Puts Brakes on Department of Labor’s Over-time Rule
The information below provides general guidance on the Fair Labor Standards Act (FLSA) exemption status rules. However, this is not legal advice. FLSA audits involve a detailed legal analysis and should always be conducted with the help of employment counsel or your General Counsel.
What’s New?
There has been a lot of buzz about updates about the Department of Labor’s (DOL) plan to raise the salary thresholds for employees to qualify as exempt from overtime pay. Here’s the latest:
On November 15, 2024, a Federal District Court in Texas overruled the DOL’s updated overtime rule, which aimed to increase the salary threshold for overtime eligibility. The court decided that the DOL exceeded its authority by prioritizing salary levels over job duties when determining FLSA exemptions.
Bottom line: The salary thresholds are reverting to pre-July 1, 2024, levels.
The Basics of Exemption Status
Exemption status under the FLSA is determined through a fact-based analysis, which includes these key components:
- Salary Basis Test: The employee must be paid a fixed salary, regardless of hours worked per week.
- Salary Level Test: This determines if the salary meets the required threshold.
- Duties Test: This evaluates whether the employee’s primary duties meet the criteria for exemption. Job titles alone don’t count—it’s all about the actual duties performed.
Employers must prove that exempt employees primarily perform duties under one of the following categories:
- Executive Exemption
- Administrative Exemption
- Professional Exemption
- Computer Employee Exemption
- Outside Sales Exemption
There’s also the Highly Compensated Employee (HCE) Exemption, which has a more relaxed duties test. Here, employers only need to show that the employee performs at least one duty of an executive, administrative, or professional exempt employee, but higher salary thresholds apply.
For non-exempt employees, overtime must be paid at one and a half times their regular rate for hours worked over 40 in a week. Note that some states also require overtime for hours worked over 8 in a single day.
Updated Salary Thresholds
With the recent court ruling, the salary thresholds for exemption are returning to their pre-July 1, 2024, levels:
- Executive, Administrative, and Professional (EAP) Exemptions: $684/week ($35,568/year)
- Highly Compensated Employee (HCE) Exemption: $107,432/year
If your organization already made adjustments for the July 1, 2024, mandate or planned to comply with the upcoming January 1, 2025, changes, you’ll need to re-evaluate. Consulting with legal counsel is essential to determine the best course of action.
State-Specific Considerations
If you thought this was complicated enough, let’s talk about state-specific rules. The Texas court ruling does not impact individual state requirements for exemption status.
- States Without HCE Exemption Recognition: Some states don’t recognize the HCE exemption as a shortcut to classify employees as exempt. Check with your legal team to confirm.
- States With Higher Salary Minimums: In certain states, the salary thresholds for EAP exemptions exceed the federal minimums. If you have employees in these states, you’ll need to follow their specific rules to ensure compliance.
The chart below outlines the salary exemption thresholds as of January 1, 2025, for EAP Exemptions:
| State | Weekly Pay | Yearly Pay | Notes |
| Alaska | $1,128/week | $58,656/year | Alaska raised their minimums to exceed the DOL’s minimum salary threshold. Now that the DOL’s salary threshold is no longer applicable, it’s TBD if Alaska will lower their thresholds. |
| California | $1,430/week | $68,640/year | Twice the state’s minimum wage rate |
| Colorado | $1,057.69/week | $55,000/year | New threshold will come out January 1, 2025 |
| Maine | $841.21/week | $43,951/year | Updated annually |
| New York (New York City and Nassau, Suffolk, and Westchester counties) | $1,237.50/week | $64,350/year | January 1, 2026: $1,275/wk ($66,300/yr) |
| New York (rest of state) | $1,161.65/week | $60,405.80/year | January 1, 2026: $1,199.10/wk ($62,353.20/yr) |
| Washington state (small employers with 1–50 employees) | $1,332.80/week | $69,305.60/year | Twice the state’s minimum wage rate |
| Washington state (large employers with 51+ employees) | $1,499.40/week | $77,968.80/year | Twice the state’s minimum wage rate |
The states below have implemented salary thresholds for the Computer Exemption:
- California: $56.97/hour or $118,657.43/year
- Colorado: $31.41/hour or $65,333.00/year
- It is unclear whether this will increase in 2025
- Washington: $58.31/hour or $121,285/year
What Should Employers Do Now?
Employers should:
- Review the changes with legal counsel to understand how this affects your organization.
- Confirm compliance with federal and state-specific exemption rules.
- Reassess any adjustments you’ve already made to salary thresholds.
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Need Help Navigating FLSA Compliance?
Managing FLSA compliance can be complicated, but The Comp Consultants can help. Reach out to learn more and fast track your compliance efforts.