Nationwide Rejection on Overtime Rule

Regardless of how one looks at the news out of Texas that has impacted employers across the US, the results will not change, at least not for now.

The short version of what one Texas court judge has accomplished by blocking the Department of Labor's (DOL) rule increasing the salary thresholds overtime exemptions under FLSA is this:

1. The ruling erases the Biden DOL’s overtime rule and resets the salary thresholds back to $35,568 and $107,432, respectively. The ruling erases the Biden DOL overtime rule and resets the salary levels to their June 30, 2024 levels.
2. This means that most executive, administrative, and professional employees need to be paid at least $684 per week ($35,568 annually), and not the $844 required by the now-defunct 2024 rule. This first threshold increase was put into action on July 1, 2024.
3. Since the ruling takes the thresholds all the way back to 2019, if so inclined, employers can roll back changes they made to comply with the rule in July and halt any plans they had for the second increase in January. However, they can’t retroactively reduce pay or change an employee’s classification.

For more information on the DOL initial ruling read: 2025: DOL and Compensation Planning

How to Mitigate the Change with Employees

• Employees should be made aware of any changes to their pay or classification before the changes take effect, and in compliance with any applicable state or local laws, which may have specific notice requirements.
• Employers should also consider the potential impacts on employee morale and do what they can to mitigate those that may be negative.
• If nothing else, explaining that changes are due to federal law and the needs of the business will help employees understand that your decisions aren’t arbitrary.
• Employers should remain transparent with staff, allow for questions and one-off conversations as needed to ensure employees are well informed. With the challenges in today's job market, retention is top of mind for most, including employees - don't give them a reason to start looking.

Back to Square One

For employees, this might feel like a step backwards when considering cost of goods (inflation) and how much income a family needs to maintain stability. The thresholds, while deemed unlawful by the DOL, were at least an acknowledgement of the meager earnings for underpaid workers.

By abandoning the entire rule, thresholds have reverted to pre-pandemic levels. Levels that hadn't experienced the rising inflation over the last four years. Regardless, major increases are off the table for the foreseeable future, as are automatic periodic increases – the latter have now been found to be unlawful multiple times.?

Conclusion

While the DOL may be out of the picture for now, with the administration transition in January, time will tell for how long.

Just because the new ruling is no longer in play, doesn't make it a bad practice, that should be the key takeaway in all of this. Employers once again have control over how high the bar is set. Too low and the workforce will respond negatively, too high and there might not be a workforce to worry about. As an employer looking to maintain, sustain, or grow, the review and reclassification is a good exercise to put into practice annually and adjust accordingly. Businesses that recognize this as a strategic opportunity to outpace competitors will likely see the results of a healthy, well-informed, retained workforce that is earning a fair wage.

Striking a balance between the business needs, employee retention and growth is challenging but not impossible.

All the best,

Denise

LinkedIn Profile | Website | Submit a Request | [email protected]

8398 Six Forks Road Suite 104, Raleigh, North Carolina | 919-873-5588