DOL’s Salary Basis Rule Vacated; Employers Should Still Exercise Caution with Exempt Classifications
By Bruce T. Garrett
Last week, a U.S. District Court Judge in Texas vacated the U.S. Department of Labor’s (DOL) rule that significantly raised the salary basis thresholds for the so-called “white collar” exemptions (executive, administrative, and professional) under the Fair Labor Standards Act (FLSA). This court ruling invalidates the DOL’s rule nationwide.
The DOL’s rule, which took effect in July, increased the salary basis threshold to $844 weekly ($43,888 annually) and the highly compensated employee (HCE) exemption threshold to $132,964 annually, with additional increases scheduled for 2025 and 2027. Following the court’s decision, the thresholds revert to pre-July levels: $684 per week ($35,568 annually) for the white collar exemptions and $107,432 annually for the HCE exemption. However, Washington’s salary thresholds for white collar employees are unaffected by the court’s ruling. Effective January 1, 2025, the following thresholds apply in Washington State:
- For employers with 1-50 employees: $1,332.80 weekly ($69,305.60 annually)
- For employers with 51 or more employees: $1,499.40 weekly ($77,968.80 annually)
It remains unclear whether the DOL will appeal the ruling. While the lower salary thresholds may simplify meeting the salary basis test, employers should still exercise caution. Exemption status also hinges on the duties test, which examines whether an employee’s primary responsibilities align with the criteria for executive, administrative, or professional exemptions. Employers should also be cautious about reverting non-exempt employees back to exempt status in light of the ruling. While potentially permissible, such changes could invite employee scrutiny or impact morale. Misclassifying employees can lead to significant liability, including back pay for unpaid overtime, penalties, interest, and potential legal actions. Employers should carefully evaluate both salary and duties to ensure compliance and avoid costly mistakes.
For more information, contact a member of Dunn Carney’s Employment Law Team.
©2024 Dunn Carney LLP. This material is provided for informational purposes only. It is not intended to constitute legal advice nor does it create a client-lawyer relationship between Dunn Carney LLP and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material.
