The Department of Labor’s Final Rule increasing the minimum salary threshold for overtime under the Fair Labor Standards Act has been blocked by a federal judge in the Eastern District of Texas. The ruling comes as a second minimum salary increase was scheduled to take effect on January 1, 2025.
The January 1, 2025 increase would have raised the salary threshold for exempting employees from overtime to $58,656 per year (or $1,128 per week) on January 1, 2025. Previously, the Final Rule increased the salary threshold from $35,568 per year (or $684 per week) to $43,888 per year (or $844 per week) on July 1, 2024.
The federal judge ruled that the agency’s increase exceeded its statutory authority. In tossing the 2024 Rule, the Texas judge found that the new salary threshold “effectively eliminates” consideration of whether an employee performs bona fide executive, administrative, or professional duties, replacing the traditional test with what amounted to a “salary-only approach.”
Implications for Contractors
With the 2024 rule now blocked, the salary threshold set by the 2019 regulations - $35,568 per year (or $684 per week) - remains in effect. This change effectively eliminates the first salary increase threshold that went into effect in July.
If a contractor has salaried exempt staff (typically they are office or professional employees), the contractor should consider the DOL’s three-part test to determine
if the employee is exempt from overtime, using the 2019 threshold:
- If an employee is salaried, earning at least $35,568 per year (or $684 per week); AND
- The employee is paid on a “salary basis”; AND
- The employee performs duties that are executive, administrative or professional, meaning that the employee does not perform manual labor.
Contractors that increased salaries to meet the July minimum threshold should not rescind the increases without careful consideration. Contractors should also review state laws, especially in New York, Colorado and California where salary thresholds were higher than the 2024 DOL rule.
SMACNA will continue to follow this issue as President-elect Trump takes office in January 2025.
