As many of you are well aware, following an initial jump in the salary threshold increase for overtime exemptions in July of this year, a second increase was set to take effect on January 1, 2025, raising the amount to $58,656.
There was a challenge to the increases in Texas, where a federal district court judge temporarily halted the rule but only as it applied to Texas. After that, a new challenge sought to expand the halting of the rule for all employers. On Friday, a federal judge held that the DOL exceeded its authority by raising the threshold too high and allowing for automatic adjustments every three years. The ruling not only strikes down the second phase increase set for January 1, but also revokes the first increase from July and the automatic three-year adjustments. This means that the salary threshold for exempt workers is back to its prior level of $35,568 and this applies to all employers nationwide. The DOL can appeal the ruling but there are a number of unknowns in terms of timing and the new Administration.
This raises immediate and critical questions for employers who have complied with the July increase and prepared for the January 1 increase. If you have already made changes as of July 1, there is a question about whether you can revert those changes back to the employee’s prior level. We don’t know what will happen with an appeal or what the new administration will do if there is an appeal, so reverting now to the pre-July level might just necessitate another reversal in the future. In addition, there is employee morale to consider as well, along with the fact that you may have also made changes to compensation levels for other employees that resulted from those increases. The same would be true of additional increases anticipated for the January 1 increase that have already gone into effect.
If you planned to make further increases as of January 1 but those have not yet taken effect, you could decide not to implement those changes pending the court’s ruling and any action from the new Administration. This will depend in part on what you have already communicated to impacted employees and their expectations. Finally, you may have re-evaluated certain positions and reclassified to non-exempt.
To complicate matters, because of this change, the effect in Maine is that employers have to revert back to the State standard, since that now exceeds the federal standard. Since the Maine 2024 overtime salary threshold is $42,450.20 and that is more than the federal level now in effect, employers have to follow the Maine level. This will be true until January 1, 2025. Starting January 1, 2025, because the Maine minimum wage will increase, the new minimum salary threshold will be $43,951 per year.
Your employment lawyers at Rudman Winchell are happy to assist with any of these difficult issues.
