Court ruling

In a decision certain to impact pay implications for frontline cleaning workers and more, a federal court in Texas struck down a rule by the U.S. Department of Labor which elevated minimum salary mandates for employees deemed as exempt from overtime and minimum wage requirements. The decision which was made on Nov. 15, immediately invalidated the DOL’s policy.

Typically, an employee needs to pass three requirements in order to be considered exempt from Federal Labor Standards Act (FLSA) minimum wage and overtime requirements: 

1. The salary level for the employee needs to meet a specified minimum amount.
2. The employee’s pay is a fixed rate that can’t be reduced based on quantity or quality of the work done.
3. The employee meets the administrative, professional or executive responsibilities of their job.

The initial DOL policy — which is currently invalidated per the federal court’s decision — increased salary thresholds to the equivalent of an annual salary of $43,888 on July 1., 2024, and was set to increase to $58,656 on Jan. 1, 2025. The July 1 increase updated the present annual salary threshold of $35,568 based on the methodology used by the prior administration in the 2019 overtime rule update. On Jan. 1, 2025, the rule’s new methodology was slated to take effect, resulting in the additional increase. 

In addition, the rule planned to adjust the threshold for highly compensated employees. Starting July 1, 2027, salary thresholds would have updated every three years by applying up-to-date wage data to determine new salary levels.

Under the court’s reversal, salary test amounts for employees goes back down to $25,568 annual ($684 weekly). The DOL has the ability to appeal the ruling, which could either reverse or uphold the ruling of the Texas federal court. 

More details on the invalidated policy and its implications can be found here.