DOL Overtime Rule Vacated: 2019 Salary Threshold Reinstated for Exempt Employees
What Happened
On November 15, 2024, a federal court in Texas partially vacated the U.S. Department of Labor's (DOL) 2024 overtime rule, which had raised the salary threshold for exempt employees under the Fair Labor Standards Act (FLSA). The court's decision reinstates the 2019 salary threshold of $35,568 per year ($684 per week) for the executive, administrative, and professional (EAP) exemptions. The 2024 rule, which had set thresholds of $43,888 (effective July 1, 2024) and a planned increase to $58,656 (effective January 1, 2025), is no longer in effect. The DOL has not issued a rescission; the change results from the court's vacatur. Organizations should verify the current status with official DOL guidance as litigation continues.
Why It Matters
The salary threshold is only one component of the three-part conjunctive test for exempt status. Employers must also satisfy the salary basis test (employees must be paid a predetermined salary) and the duties test (primary duties must involve executive, administrative, or professional responsibilities). The reinstated threshold significantly reduces the number of workers eligible for overtime protections, affecting payroll budgets, employee classification, and compliance risk. Employers who already raised salaries to comply with the 2024 rule may face difficult decisions about maintaining or reducing pay. Additionally, many states have their own overtime and salary threshold laws (e.g., California, New York, Colorado) that may impose higher requirements. Employers must comply with the most stringent applicable law.
What Organizations Should Do
- Reclassify affected employees: Review employees who were reclassified to exempt under the 2024 rule. If their salary is below the reinstated threshold ($35,568), they must be reclassified as non-exempt and eligible for overtime, or their salary must be increased to meet the threshold.
- Update payroll systems: Adjust overtime calculations and time-tracking configurations to reflect the reinstated threshold. Ensure systems can handle state-specific variations.
- Audit duties tests: Verify that exempt employees meet the duties test for their exemption category. The salary threshold is only one part of the test; misclassification can lead to FLSA violations.
- Communicate changes: Notify HR, managers, and affected employees about classification changes and any adjustments to pay or overtime eligibility.
- Monitor state laws: Check state-specific overtime and salary threshold requirements, as many states have higher thresholds or different duties tests.
- Document decisions: Maintain records of classification decisions, salary adjustments, and duties analyses to demonstrate compliance in the event of a DOL investigation.
For ongoing compliance management across multiple domains, including HR, payroll, and wage laws, platforms like AIGovHub provide regulatory alerts, automated compliance tools, and vendor assessments to help organizations stay ahead of changes. The HR Compliance Checker tool can assist in evaluating classification decisions and generating documentation for audits.
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This content is for informational purposes only and does not constitute legal advice. Organizations should consult with legal counsel regarding specific compliance obligations.