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Dive Brief:
The U.S. Department of Labor’s Wage and Hour Division announced Thursday it was rescinding the embattled Biden-era overtime rule, more than a year after federal courts vacated the 2024 regulations. The rule took effect Friday.
The 2024 rule raised the earnings threshold to qualify for overtime to $844 per week in July 2024, from the 2019-issued threshold of $684 per week. It was then set to increase again to $1,128 per week on Jan. 1, 2025, and would have increased periodically from then on.
In late 2024, two Texas district courts vacated that year’s final rule. After DOL dropped its appeals of the decisions earlier this month, the 5th U.S. Circuit Court of Appeals dismissed the cases and the orders remain final judgments, DOL said.
Dive Insight:
This rescission of the 2024 final rule is unsurprising given President Donald Trump’s administration signaling it would revisit the rule, Keith Kopplin, co-chair of Ogletree Deakins’ wage and hour practice group, and Zachary Zagger, senior marketing counsel at Ogletree, said in a blog post.
Back in September, DOL did say as much: On its agenda, along with joint employer status and independent contractor classification, DOL said it “will determine whether certain salaried employees are exempt from FLSA minimum wage and overtime requirements.”
Kopplin said that with this rule, Trump’s DOL is restoring the threshold to the levels of the 2019 rule. “Notably, this removes the 2024 rule’s automatic triennial threshold adjustments,” Kopplin added.
What else should HR keep in mind? The salary threshold is only one part of the three-part conjunctive test, Jim Paretti, a co-chair of Littler’s Workplace Policy Institute, said via email.
Along with earning the minimum salary, to be exempt under FLSA, the employee “must be paid a fixed, predetermined sum each week regardless of the quantity or quality of the work they perform,” Paretti said, outlining the “salary basis” test. Likewise, the employee’s “primary work must be the performance of exempt EAP duties,” he said, which is called the “duties test.”
“Simply earning above the threshold does not make an employee automatically exempt. Where that criterion is met, employers must still make certain that the employee is paid on a salaried basis (versus hourly or by the piece), and that their work is primarily performing tasks that fall within the ‘duties test’ exemption,” Paretti said.
“The Wage and Hour Division is committed to ensuring that its regulations accurately reflect the proper standards and requirements that we enforce,” WHD Administrator Andrew Rogers said in a statement. “It is critical that each element of the section 13(a)(1) exemptions – duties, salary basis, and salary level requirements – be clearly framed for the benefit of both employees and employers.”
Looking ahead, DOL also has expressed intent to iron out standard salary levels for workers in the U.S. territories of American Samoa, Guam, Northern Mariana Islands, Puerto Rico and the U.S. Virgin Islands, as well as for talent in the motion picture industry.
