Federal Judge Halts Overtime Rule Changes Nationwide
Effective: November 15, 2024
In a significant ruling on November 15, the U.S. District Court for the Eastern District of Texas vacated the Biden administration’s overtime rule, which would have increased the salary threshold for "white-collar" exemptions. The court ruled that the steep rise in the salary threshold displaced the duties test for these exemptions, exceeding the Department of Labor’s (DOL) authority.
This decision also struck down the rule’s provision for automatic salary threshold increases every three years, finding it violated the notice-and-comment requirements of the Administrative Procedure Act.
What Happened?
The 2024 rule proposed raising the salary threshold from the current level of $35,568 annually to:
$43,888 (effective July 2024).
$58,656 (previously effective January 1, 2025)
However, the court concluded that the 2024 rule, like the 2016 rule, was not based on a permissible construction. Both rules dramatically increased the salary threshold percentile, shifting it from the 20th to the 35th percentile of full-time salaried workers in the South, which the court found to impermissibly override the duties test.
What This Means for Employers Nationwide
The annual federal exempt status salary threshold has moved back to $35,568.
Employers should carefully review their compensation plans and assess any adjustments made in anticipation of the rule changes. If salary increases or reclassifications were already implemented, employers must decide whether to maintain these changes or revert to prior practices.
Specific Considerations for Colorado Employers
For Colorado employers, the federal rollback is less impactful due to the state’s COMPS Order #38, which already mandates a higher salary threshold:
2024: $55,000
2025: $60,000
Employers in Colorado must continue to follow these higher state thresholds regardless of the federal ruling. Additionally, the release of COMPS Order #39 is expected before the end of the year or early next year, potentially introducing further updates.
What Employers Should Do Now
Ensure Compliance:
Confirm exempt employees meet both the duties test and applicable salary thresholds (federal or state).
Review Changes:
Assess whether to maintain or revise salary adjustments already made, considering state notification laws and employee morale.
Stay Informed:
Monitor federal appeals and forthcoming state updates, like COMPS Order #39.
Consult Your HR Business Partner (if applicable):
Seek guidance on compliance and effective communication for any planned changes.
Next Steps
Vida HR is here to help you navigate these developments. We will continue to monitor changes and provide updates to ensure your business remains compliant. If you have questions or need assistance, don’t hesitate to reach out.
Get day-to-day updates on Federal Judge Halts Overtime Rule Changes Nationwide visit the Vida HR Knowledge Center (Vida HR Clients Exclusive).
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