The United States Department of Labor is not enforcing its new overtime rule, which raised the minimum weekly salary an employee must make to be exempt from overtime in a two-step process. The first step raised the salary threshold effective July 1. The second step was due to raise the minimum salary threshold for overtime even more on January 1. A federal judge revoked the rule in November. Although DOL has appealed the judge’s decision, it has announced that it will not enforce the rule while the appeal is pending. Instead, it will enforce its 2019 rule that set the minimum salary required for a position to be exempt from overtime at $684 per week.

Background

Last April, the U.S. Department of Labor published a new rule raising the minimum weekly salary an employee must make to be exempt from overtime from $684 per week to $844 per week beginning on July 1, 2024 and to $1,128 per week beginning January 1, 2025. The salary threshold for highly-compensated employees who did not satisfy the duties test for exemption went from $107,432 to $132,964 annually on July 1 and were due to increase to $151,164 on January 1.

Employers everywhere began the process of deciding whether to raise the salaries of positions that would loose exempt status or reclassifying those positions as nonexempt and eligible for premium overtime pay. On July 1, some employees saw their salaries increase to $844 per week, while others began keeping track of their hours and for the first time saw overtime pay when they worked more than 40 hours in a week. As the months wore on, some employees anticipated raises to $1,128 per week at the new year, while others who routinely worked more than 40 hours per week looked forward to earning overtime beginning January 1st. But that is not to be.

The Current Status of the New Overtime Rule

In June, before the new salary threshold rule took effect, the State of Texas sued DOL and got an injunction against the rule taking effect within the State of Texas. On November 15, 2024, a federal judge for the Eastern District of Texas vacated the rule with nationwide effect, declaring that it went beyond DOL’s authority. DOL has appealed that decision to the federal Fifth Circuit Court of Appeals and asked that its appeal be considered on an expedited basis. So far, there is no indication that the Fifth Circuit will expedite the appeal: as of the date of this post, the case does not appear on the Fifth Circuit’s calendar for December, January or February. It is unclear whether DOL, as headed by President-Elect Trump’s nominee for Secretary of Labor, will maintain the appeal. DOL has no choice at this time but to revert to the rule in effect prior to July 1, 2024. Here is what DOL has posted on the website of its Wage and Hour Division:

On April 26, 2024, the U.S. Department of Labor (Department) published a final rule, Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees, to update and revise the regulations issued under section 13(a)(1) of the Fair Labor Standards Act implementing the exemption from minimum wage and overtime pay requirements for executive, administrative, and professional employees. Revisions included increases to the standard salary level and the highly compensated employee total annual compensation threshold, and a mechanism for updating these earnings thresholds to reflect current earnings data. On November 15, 2024, the U.S. District Court for the Eastern District of Texas vacated the Department’s 2024 final rule. Consequently, with regard to enforcement, the Department is applying the 2019 rule’s minimum salary level of $684 per week and total annual compensation requirement for highly compensated employees of $107,432 per year. Lawsuits regarding the 2024 final rule are currently pending in two other federal district courts, and the United States has filed a notice of appeal from the November 15 decision. The Department will update this notice with additional information as it becomes available.

Conclusion

Employers may, of course, keep employees at the higher salaries they adopted on July 1. They may also return them to their pre-July salaries. They may keep in nonexempt status employees who were formerly exempt but made nonexempt (because they did not earn enough to meet the new minimum salary rule) and allow them to continue earning overtime. They may also return those employees to exempt status since the 2019 rule now applies again. Either way, the situation has created no little amount of confusion and no little amount of work for human resources and payroll folks.