The July 1, 2024, effective date for the U.S. Department of Labor’s (DOL) recently issued final rule concerning the Fair Labor Standards Act’s (FLSA) “white collar” exemption has arrived. Unfortunately, the litigation that was filed to attempt to circumvent the final rule did not result in a reprieve for private or public employers (besides the State of Texas) from the final rule’s salary increase effective as of July 1.

As a result, according to the final rule as it stands, employers must increase salaries paid to exempt employees to at least $43,888 per year ($844 per week) effective immediately. Additionally, employers will not be able rely on the “highly compensated employee” exemption unless they pay at least $133,964 per year (and otherwise satisfy the duties test for that exemption). Employees whose salaries are under these new thresholds will not be considered exempt. Accordingly, they must record their working hours and must be paid time-and-a-half overtime for hours worked in excess of forty in a workweek.

As mentioned in our previous edition of the Informed Employer, three suits were filed in federal courts in Texas shortly after the DOL announced the final rule in April. The suits were filed by the State of Texas, the Texas Attorney General, and a coalition of national trade associations and businesses. On June 28, 2024, the judge overseeing two of the cases that had been consolidated in his court issued an order preliminarily restraining and enjoining the DOL from implementing and enforcing the final rule’s salary increases only as to the State of Texas as an employer. The judge declined to issue a nationwide injunction, noting that the other plaintiffs in the cases had not requested preliminary relief and that the State of Texas had not submitted evidence demonstrating that the other plaintiffs were likely to be injured by the final rule. The opinion stated that while the court had the power to issue a universal injunction, it was also free to exercise its discretion to tailor the relief for the requesting party only.

Importantly, the suit filed by the coalition of trade groups and businesses has not been dismissed – far from it. In not filing for a preliminary injunction, it could be that the plaintiff group intends to focus on obtaining relief only from the significantly higher January 1, 2025, increase (to $58,656 per year or $151,164 for the “highly compensated employee” exemption) or from the every-three-years automatic increases that are baked into the final rule.

For any employer who has not already prepared to implement the final rule’s July 1 increase, it is important that you quickly consider your risks and options. While there is still pending litigation challenging the final rule, it is uncertain whether that litigation will result in the courts invalidating the July 1 increase. If you prefer to avoid that risk, increases will need to be provided quickly to avoid losing the exemption and incurring liability for unpaid overtime. As an alternative, changes will need to be made so that those employees start recording their hours worked, allowing you to calculate and pay for any overtime.

Ice Miller’s Workplace Solutions Group’s attorneys will continue to closely monitor the status of the pending litigation and will provide updates when developments occur. In the meantime, if you have questions regarding how to comply with the DOL’s final rule in your workplace, contact any member of the Workplace Solutions Practice Group at Ice Miller.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.