New exempt salary threshold struck down: Why a judge said the feds’ rule had ‘gone seriously awry’

Editor’s note: The opinions expressed in this commentary are the author’s alone. Robert J. Hingula is employment class and collective actions co-chair at Polsinelli’s Kansas City office. He primarily focuses his practice on trial and counseling work involving labor and employment law.

This commentary was originally published by Polsinelli.

Employers have been waiting with bated breath on the challenges to the U.S. Department of Labor’s newest salary increase for exempt employees scheduled to take effect on January 1, 2025. On Nov. 15, U.S. District Court Judge Sean Jordan for the Eastern District of Texas granted summary judgement in Texas v. Dept. of Labor — striking down the DOL’s April 2024 rule.

As a brief recap, in late April 2024, the DOL proposed two increases to the minimum salary threshold for the FLSA’s executive, administrative, and professional exemptions (known as the White Collar Exemptions). At the time of the new rule, the salary threshold was set at $684 per week, or $35,568 per year. The rule made the first increase starting July 1, 2024, of $844 per week ($43,888 annually), and the second increase starting on January 1, 2025, of $1,128 per week ($58,656 annually).

While there were several challenges before the July 1, 2024 increase, three courts that had challenges before them did not issue injunctive relief to prevent that increase from going into effect.

In his order, Judge Jordan found that the DOL’s rule exceeded its authority. Specifically, Jordan found that while the DOL can use salary as a part of its authority to define the requirements of the White Collar Exemptions, the salary test “is not included in the statutory text,” and is “not unbounded.” He stated that the salary threshold cannot “displace” the duties tests for each of the White Collar Exemptions.

In using the 2024 U.S. Supreme Court case Loper Bright Enterprises v. Raimondo in his reasoning, Jordan examined the impact of the salary threshold increases compared to prior adjustments, specifically the latest increase in 2019. He found that the new salary increases did not just screen out those employees who were clearly non-exempt, but also resulted in disqualifying significant portions of employees who would otherwise meet the applicable duties tests. For example, the judge calculated that the July 2024 increase alone resulted in a third of prior exempt employees being disqualified from the exemption.

“When a third of otherwise exempt employees who the Department acknowledges meet the duties test are nonetheless rendered nonexempt because of an atextual proxy characteristic — the increased salary level — something has gone seriously awry.”

Jordan’s ruling completely strikes the April 2024 rule on a nationwide basis — including the increases that occurred on July 1, 2024. Thus, the salary threshold is reverted back to the $684 weekly ($35,568 annually) amount.

The DOL can appeal the decision, but with the upcoming change in presidential administration, it is uncertain what the DOL’s next step will be.

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