Federal Judge Strikes Down U.S. Department of Labor's Minimum Salary Threshold Increases for Exempt Workers
By: Benjamin Goldberg, Associate at Lippes Mathias LLP and Sarah E. Steinmann, Associate at Lippes Mathias LLP
On November 15, 2024, a federal judge in Texas overturned a final rule (the “DOL Rule”) issued by the U.S. Department of Labor in April 2024 that increased – and would have also periodically increased -- federal minimum salary thresholds for executive, administrative, and professional exemptions from minimum wage and overtime requirements under the Fair Labor Standards Act (“FLSA”). Salary requirements for the FLSA’s highly compensated employee (“HCE”) exemption were also increased under the DOL Rule. The DOL Rule went into effect on July 1, 2024 (except in Texas where the federal court issued a preliminary injunction preventing implementation).
The DOL Rule had a minimal impact on New York-based certified home health agencies, licensed home care service agencies, hospices, and managed long-term care plans (collectively, “Agencies”). This is because the current salary thresholds for executive and administrative exemptions under New York State law are already considerably higher than the minimum standards the DOL Rule set under the FLSA.
Still, in New York State, the DOL Rule impacted private sector Agencies’ ability to apply the ‘professional’ exemption because the DOL Rule’s increased salary thresholds (like the current lower federal salary threshold) for the professional exemption was greater than the zero dollar state law salary threshold for that exemption. In addition, although some Agencies’ employees may have qualified for the FLSA’s HCE exemption, New York law, which does not have an equivalent exemption, mandated that Agencies still pay those employees overtime under state law.
DOL Rule Overturned
The State of Texas and a group of business associations sued the DOL in a Texas federal court in June 2024 to stop implementation of the DOL Rule. They argued that the DOL had exceeded its authority in increasing the minimum salary thresholds for executive, administrative, and professional employees. Shortly after the lawsuit was commenced, the federal court issued a preliminary injunction blocking implementation of the DOL Rule in Texas until such time as the court could make a final ruling on whether DOL had exceeded its authoring in adopting the rule. The DOL Rule, however, was implemented in other states, such as New York, beginning in July 1, 2024.
In the November 15th decision, U.S. District Court Judge Sean Jordan for the Eastern District of Texas held that while the DOL has the authority to “define and delimit” overtime exemptions under the FLSA, the DOL’s authority is “not unbounded” and that “the Department’s changes to the minimum salary level in the 2024 Rule exceed its statutory jurisdiction.” Notably, Judge Jordan relied on the Supreme Court’s recent decision in Loper Bright Enters. v. Raimondo, which overruled the principle of “Chevron deference,” which previously required courts to defer to an agency’s reasonable interpretation of an ambiguous law that the agency enforces.
Implications
The DOL Rule’s first increase to salary thresholds for executive, administrative, and professional employees, which was effective in all states and territories outside of Texas in July, no longer applies. In addition, the salary thresholds that were set to increase under the DOL Rule in January 2025 will not go into effect.
That said, it should be noted that Judge Jordan remanded the matter to the DOL for further consideration. With a new incoming administration, however, there is some uncertainty about what form a new ruling from the DOL might look like and it is very possible that the DOL might take a different approach under the new administration.
As noted, given that New York’s overtime laws are generally more stringent for employers than the FLSA, Judge Jordan’s overturning of the DOL Rule is not likely to have a major effect on business operations for most Agencies in New York.
We encourage Agencies to continue to pay close attention to anticipated guidance from the DOL and be prepared to see further developments regarding these exemptions under New York and Federal statutes.
Please note that articles are for general, informational purposes, are not legal “advice,” and do not create an attorney-client relationship. Because each situation is unique, the information should be considered to be general in nature and should never be considered a substitution for legal counsel. Readers should not take, or refrain from taking, any action based on information in this article without first seeking legal advice from competent counsel.