In April, this blog covered the publication of a new Final Rule from the U.S. Department of Labor regarding the executive, administrative, professional, outside sales, or computer employee (EAP) and the highly compensated employees (HCE) exemptions to the overtime provisions of the Fair Labor Standards Act (FLSA). The new rule would have moved millions of workers from exempt to non-exempt status. Following a decision issued by a federal court in Texas earlier today, that rule’s future is very uncertain. Whether you are a worker or an employer, the best way to ensure you are proceeding under the correct interpretation of the FLSA is to work closely with an experienced Atlanta wage and hour lawyer.
The lawsuit, which took place in the federal Eastern District of Texas, consolidated two actions, one launched by a local chamber of commerce (Plano, Texas) and the other by the State of Texas. The pair argued that the DOL exceeded its statutory authority by promulgating the new EAP/HCE exemption rule.
An earlier ruling from the court enjoined implementation of the rule… but only with regard to employees of the Texas state government. The ruling from earlier today established a nationwide injunction, meaning that the rule is rolled back in its entirety across the country.
The rule had already begun to take effect… partially. The rule called for partial enforcement as of July 1, 2024. As of that date, covered employers could only apply the EAP exemption to workers making at least $844 per week ($43,888 annually) and limited the HCE exemption to those earning $132,964 or more annually. As of Jan. 1, 2025, the floor would have been $1,128 per week ($58,656 annually) for the EAP and $151,164 annually for the HCE.
Now, the applicable salaries for those exemptions revert to what they were before the DOL published its rule in April. That means a floor of $684 per week (or $35,568 annually) for the EAP and $107,432 annually for the HCE, or roughly 2/3 of the floors the April 2024 rule established.
The rule’s future could be bleak. The current administration is expected to appeal the Texas judge’s ruling, but that appeal likely will not be resolved before President Biden’s term ends. Once President-elect Trump is sworn in in January 2025, his administration may choose not to continue the fight to preserve the rule, leaving the injunction to stand.
If this seems like déjà vu, there is good reason. Late in President Obama’s second term in office, the DOL passed a rule that more than doubled the salary for the EAP exemption. A lawsuit in Texas ensued (with the Plano Chamber of Commerce as one of the plaintiffs) and the court ruled against the DOL. In that case, the court ruling did not occur until the summer of 2017 and the Trump Administration simply chose not to appeal, letting the injunction stand.
Going Forward…
Employers who had already raised salaries or altered compensation methods (or announced intentions to do so) in advance of the Jan. 1 deadline may revert to their old compensation methods. Employers might choose not to (for worker morale or other internal reasons,) but the law does not forbid them from going back and lowering salaries. Several states require employers to provide advance notice of wage reductions to employees, but Georgia (along with Florida, Alabama, Tennessee, and some others) does not.
Employers, regardless of the salary decisions they make, should use this series of events as an opportunity to review their employees’ job descriptions and the applicability of the other, non-salary-dependent elements of the EAP exemption to ensure that the workers to whom they are applying the exemption meet all of the requirements.
If you have questions about compensation, applicability of exemptions, or anything related to the FLSA, the best course of action is to consult qualified legal counsel. The knowledgeable Atlanta wage and hour attorneys at the law firm of Parks, Chesin & Walbert are here to help. Our team provides clients customized solutions based on our extensive experience and in-depth (and fully up-to-date) understanding of the law and applicable regulations. Contact us through this website or at 404-873-8048 to schedule a consultation today.