Federal Court Blocks FLSA Salary Increase Nation Wide

On November 15, 2024, the U.S. District Court for the Eastern District of Texas struck down the Department of Labor’s 2024 overtime rule, delivering a significant victory to business groups. The ruling blocks changes that would have dramatically expanded overtime eligibility for millions of American workers.

The now-vacated rule would have raised the minimum salary threshold for overtime exemption in two stages: first from $35,568 to $43,888 in July 2024, then to $58,656 in January 2025. It also included a mechanism for automatic increases every three years. The Department estimated these changes would have made about four million currently exempt workers eligible for overtime pay.

The District Court ruled that the Department exceeded its authority by implementing a de facto “salary only” threshold that effectively overrode the Fair Labor Standards Act’s (FLSA) focus on job duties. The law exempts workers in executive, administrative, and professional roles from overtime requirements based primarily on their job responsibilities, not just their salary level.

The Court also rejected the automatic increase mechanism, ruling that it violated Administrative Procedure Act requirements for public notice and comment on regulatory changes. The decision vacates the entire rule nationwide, meaning the current $35,568 salary threshold remains in effect.

The ruling’s impact extends across all sectors of the economy, affecting millions of workers and employers, including state and local governments. For now, employers can continue operating under the existing overtime regulations while maintaining compliance with the FLSA’s duties test for determining exempt status. Employees should look carefully at their duties and minimum weekly salary to ensure they are being compensated correctly.

The Department of Labor Drastically Increased the Minimum Salary Threshold for Overtime Exempt Employees

The federal Fair Labor Standards Act (FLSA) requires all employees to be paid an hourly wage. Employees that work more than 40 hours in a workweek are required to be paid overtime at the rate of one and a half times their hourly wage. Certain employees are exempt from being paid overtime when they are paid a minimum weekly salary. Beginning July 1, 2024, the minimum weekly salary for exempt employees will increase from $684 ($35,568 per year) to $844 ($43,888 per year). Six months later, on January 1, 2025, the minimum weekly salary will increase to $1,128 ($58,656 per year).   

Not every employee qualifies to be paid on a weekly salary basis. As a general rule, only employees that fall within the definition of a bona fide executive, administrative, or professional are permitted to be paid on a salary basis. Employees performing manual, non-management labor are not permitted to be paid on a weekly salary basis. Employers that fail to properly classify workers as hourly or exempt, and pay them accordingly, may be liable for back owed wages, overtime pay, and penalty wages.  

The increased minimum salary threshold is expected to impact four million workers exempt under the current regulation. If you are an employee misclassified as an exempt employee and know you are owed overtime pay, contact our office to learn more about your rights.

The EEOC’s Focus on the Construction Industry

The U.S. Equal Employment Opportunity Commission (“EEOC”) will focus on the construction industry to prevent and remedy employment discrimination. The EEOC attributes the focus on the construction industry to what it identified as a pattern of egregious harassment and discrimination incidents against women and persons of color on construction job sites. The incidents referred to include discrimination in recruitment and apprenticeships, hostile work environments based on race, national origin, or sex, and unequal treatment in training, hours, pay, promotions, and layoffs.

The EEOC published a report highlighting incidents where employers failed to respond to employee claims of harassment and discrimination by inaction or retaliation. Those incidents resulted in large monetary damages to employers and mandatory revisions of the employer’s policies and procedures. The EEOC states they intend to continue to enforce anti-discrimination laws on behalf of employees and begin to collaborate with employers, workers, unions, industry groups, and civil rights organizations to develop industry-specific prevention and training to ensure fair hiring practices, equal treatment on the job, and safe and inclusive workplaces.

The EEOC is abiding by their statements and actively filing lawsuits against construction companies across the country for discrimination incidents on behalf of employees. This governmental intervention calls for the construction industry to acknowledge and address employment discrimination issues that may arise to create respectful and inclusive workplaces.

Companies should review their policies and procedures surrounding equal employment opportunities, discrimination, and harassment. Construction employees should understand and follow their employer’s policies and report violations within the company or outside agencies as needed.

By: Samuel Hernandez, Attorney; Irma Alvarez, Summer Law Clerk (2023)