Federal Court Blocks DOL Overtime Salary Threshold Increase Nationwide

What Changed

On November 15, 2024, Judge Sean Jordan of the U.S. District Court for the Eastern District of Texas vacated the Department of Labor's (DOL) 2024 final rule that was set to raise the minimum salary threshold for overtime-exempt employees under the Fair Labor Standards Act (FLSA).

The DOL's final rule had already implemented a first-phase increase on July 1, 2024, raising the salary threshold from $35,568 to $43,888 per year for bona fide executive, administrative, and professional (EAP) employees. A second phase was scheduled for January 1, 2025, which would have further increased the threshold to $58,656 per year. The rule also included automatic triennial adjustments going forward. Additionally, the annual compensation threshold for highly compensated employees (HCE) was set to rise from $107,432 to $151,164.

The court found that the DOL exceeded its authority by effectively replacing the FLSA's duties-based test for determining exempt status with a predominantly salary-based test, which was inconsistent with the statute's text and congressional intent. The ruling vacated the entire 2024 rule on a nationwide basis, meaning the salary thresholds revert to the levels established under the 2019 rule: $35,568 per year ($684 per week) for EAP employees and $107,432 per year for HCE employees.

Who Is Affected

This ruling affects all U.S. employers with employees classified as exempt under the FLSA's white-collar exemptions (executive, administrative, and professional). Specifically:

Employers who had already raised salaries to meet the July 1, 2024 threshold of $43,888 may now evaluate whether to maintain those levels or adjust
Employers who were preparing to raise salaries to $58,656 by January 1, 2025 no longer face that federal requirement
Highly compensated employees earning between $107,432 and $151,164 are no longer at risk of losing HCE exempt status under the vacated rule
Employers in states with their own salary threshold requirements (such as California, New York, and Washington) must still comply with those state-level standards, which may exceed the reverted federal level

Where It Applies

This is a nationwide ruling. The court vacated the DOL's rule in its entirety, not just for the plaintiffs in the case. The decision applies to employers in all 50 states, the District of Columbia, and U.S. territories subject to the FLSA.

However, employers should note that state and local overtime laws may impose higher salary thresholds that remain in effect regardless of this federal ruling. For example, California, New York, Washington, and Colorado each have their own salary tests for exempt status.

When It Takes Effect

The court issued its decision on November 15, 2024. Key dates:

Immediate: The January 1, 2025 increase to $58,656 will not take effect
Immediate: The automatic triennial adjustment mechanism is vacated
Reverted threshold: The federal salary floor for EAP exemptions returns to $35,568 per year ($684 per week) under the 2019 rule
July 1, 2024 increase status: The court's ruling vacated the entire 2024 rule, which means the July 1 increase to $43,888 is also technically vacated, though employers who already raised salaries are unlikely to reduce them
Appeal possibility: The DOL could appeal to the Fifth Circuit, but the change in presidential administration in January 2025 makes a DOL appeal unlikely

Why It Matters

This ruling has significant implications for employer budgeting, classification decisions, and compliance planning:

Budget relief: Many employers had budgeted for salary increases to meet the $58,656 threshold. That expenditure is no longer federally required.
Classification complexity: Employers who reclassified employees from exempt to non-exempt in anticipation of the rule change now face decisions about whether to reverse those changes.
State law remains: Employers in states with higher salary thresholds gain no relief from this ruling. Multi-state employers must continue to comply with the highest applicable threshold in each location.
Uncertainty persists: While the current ruling is clear, legislative or regulatory changes under future administrations could revisit the salary threshold. Employers should build flexibility into their compensation strategies.
Morale considerations: Employers who raised salaries to meet the July 1 threshold should think carefully before reducing them, even if legally permitted. Salary reductions carry significant employee relations risks.

The Humareso Take

We know many of our clients were deep in planning mode for that January 1 deadline, and this ruling is a significant plot twist. While it removes the immediate federal pressure, we strongly advise against viewing this as an excuse to do nothing. State-level salary thresholds are still climbing, the duties test still applies, and misclassification risk hasn't gone anywhere. If you already raised salaries to $43,888 or higher, think long and hard before rolling those back -- the legal risk may be gone, but the employee relations fallout is very real. Use this breathing room to get your classification house in order the right way.

Recommended Action Steps

Review your exempt employee classifications to ensure they meet the duties test under the FLSA, independent of the salary threshold. The duties test has always been the primary determinant of exempt status.
Assess salary decisions already made in response to the July 1, 2024 increase. If you raised salaries to $43,888 or above, consult with counsel before considering any reductions, as state law or contractual obligations may apply.
Check state-specific salary thresholds in every state where you have exempt employees. States including California, New York, Washington, and Colorado maintain their own minimums that may exceed $35,568.
Communicate with affected employees if your organization had announced upcoming salary changes tied to the January 1 deadline. Transparent communication prevents confusion and preserves trust.
Audit your job descriptions and classification records to ensure exempt positions genuinely meet the duties test criteria for executive, administrative, or professional exemptions.
Contact your Humareso representative for a classification and compensation review tailored to your organization's multi-state footprint.