On November 15, 2024, a federal district court vacated the Department of Labor’s (“DOL”) salary-threshold increase for the executive, professional and administrative (EAP) exemption. We’ve been following this closely, as have many employers, without real clarity. But now, we have an answer.
The Decision
The U.S. District Court for the Eastern District of Texas ruled the DOL exceeded the power given to the agency by Congress when it increased the salary threshold in July and the automatic increase in January 2025. Specifically, the Court ruled Congress gave the DOL the power to define the terms of the EAP exemption, including the terms “executive,” “administrative,” and “professional.” However, the Court found Congress intended the DOL to define the duties of these exempt positions, not the dollars paid to them.
The Texas Court made it clear the 2024 Rule followed the same approach as the 2016 Rule, which also failed. This failed approach included the automatic increases contemplated by both Rules. Much of the reasoning to vacate the proposed rule in the 2024 decision mirrored and referenced that of the 2016 decision.
The Court also found the July 2024 increase (from $684 to $844 per week) exceeded the DOL’s authority, as well as the proposed increase on January 1, 2025 (up to $1,128 per week). The Court focused both on the methods used to calculate the numbers, and the automatic indexing mechanism, finding these all exceeded the DOL’s authority as an agency.
Because the DOL exceeded its authority, the Court vacated the entire 2024 Rule for the whole country (not just Texas, as it was earlier).
What does this mean?
It means we go back to pre-July 2024 standards. The salary threshold for an EAP-exempt employee returns to, or remains at, the previous $684 per week minimum. There are no changes to the duties tests for executive, administrative, or professional employees.
Many employers increased salaries in July to meet the DOL’s rule. These employers are probably wondering what to do for these employees. Do you keep them at their current rate? Can they drop back down to the previous level? Can they “claw back” the extra amount now that you are not required to pay this increased rate to meet the exemption requirements?
Employers can consider dropping salaries back down, but make sure to consider the potential impact on the morale of the employees. Notice of any change is also key. Absent wrongdoing on behalf of the employee, clawing back wages already paid to employees is not a legally viable option, and comes with its own consequences, both from the FLSA and other state and federal laws. Generally, wages earned and paid cannot be taken back.
It’s a complicated, brand-new (old) world. Make sure to reach out and talk with our experienced team here at Bricker Graydon. We’re here to help navigate the next steps.
