We previously reported on the U.S. Department of Labor’s (DOL) promulgation of new regulations increasing the salary basis limits applicable to certain overtime exemptions under the Fair Labor Standards Act (FLSA) in our article titled “FLSA Overtime Exemptions Increasing Again in January 2025 – Are Your Professional Employees Still Exempt?” available at https://pklaw.com/articles/flsa-overtime-exemptions-increasing-again-in-january-2025-are-your-professional-employees-still-exempt/
On November 15, 2024, a federal court in Texas struck down the DOL’s rule, leaving no aspects of the 2024 rule in place, including the salary basis increase that took effect July 1, 2024 (raising the salary basis from $34,568/yr to $43,888/yr) as well as the future increase set to take place on January 1, 2025, and the automatic increases every three years thereafter. The Texas court vacated the DOL’s 2024 rule nationwide, applying to all employers – not just those in Texas. The court concluded that the DOL lacked the authority to adopt the salary basis increases, much like the 2016 ruling in which the same court blocked a 2016 DOL rule that would have increased the salary level in similar fashion. See Injunction Issued on New Salary Thresholds for FLSA Exemptions, Edmund O’Meally, Esq., Nov. 23, 2016 available at https://pklaw.com/news/injunction-issued-on-new-salary-thresholds-for-flsa-exemptions/
Since the 2016 chapter of this saga, the U.S. Supreme Court issued its decision in Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2244 (2024). In Loper Bright, the Supreme Court overruled its earlier decision in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), from which the doctrine of “Chevron deference” grew. The Chevron doctrine required courts to defer to reasonable agency interpretations when a statute is silent or ambiguous with respect to a specific issue. Loper Bright eliminated the Chevron doctrine and instead requires that courts exercise independent judgment to decide whether an agency has acted within its statutory authority.
The Eastern District of Texas employed the standard of review as set forth in Loper Bright in its decision to vacate the DOL’s 2024 rule. Exercising its independent judgment, the court concluded that the salary increases mandated by the DOL’s 2024 rule exceeded the agency’s statutory authority and that the DOL lacked statutory authority to adopt automatic increases to the salary basis level.
The DOL may appeal this decision to the U.S. Court of Appeals for the Fifth Circuit, but the new administration will likely decline to pursue the appeal if taken.
What does this mean for employers? The salary basis level increases we previously reported are no longer in effect and the salary basis level in effect going forward will be the 2019 level set at $684/week or $35,568/year and $107,432/year for highly compensated employees.
What if an employer already implemented the salary basis increase that went into effect on July 1, 2024? If you are considering reducing an employee’s wage rate, keep in mind that Maryland law requires that employers provide at least one pay period of advance notice of a decrease in a wage rate.
Finally, consider the big picture. Over the last eight years, the DOL made multiple attempts to change the law by promulgating rules substantially increasing the salary basis levels applicable to certain FLSA exemptions. The judiciary rejected those attempts. HR professionals must pay attention to the law and understand the nuances between executive agency rulemaking, legislation enacted by Congress, and judicial review of those statutes and agency rules. After agencies promulgate rules, they may face legal challenges, and courts might enjoin those rules either on a limited or even a nationwide basis. Judicial precedent, politics, and even timing can impact the rules applicable to employers, making the job of HR professionals difficult as the foundation beneath them shifts.
Adam E. Konstas is a Member with PK Law. He represents local school boards, superintendents, private schools, colleges, and private sector employers before federal and state courts as well as federal and state administrative agencies on a variety of matters, including employment discrimination claims, employee (and student) discipline, labor relations, and wage/hour claims. Mr. Konstas also advises clients on the design and implementation of policies and procedures regarding employee (and student) relations, employee handbooks, hiring and termination procedures, as well as school system-wide policy issues including the use of online instructional tools and cloud computing, student data privacy, anti-discrimination. Mr. Konstas is well versed in the burgeoning website accessibility area of law and has successfully resolved a number of matters involving website accessibility. He can be reached at 410-339-5786 and akonstas@pklaw.com.
