A federal judge has nullified a Biden administration rule that increased the salary threshold for the "white-collar" overtime exemption. The U.S. Department of Labor's rule, which set a $43,858 salary threshold effective July 1, 2024, was vacated nationwide by the decision on November 15. This ruling also halts a planned increase to $58,656 scheduled for January 1, 2025, and stops automatic threshold increases every three years.
The blocked $58,656 threshold under the Fair Labor Standards Act would have required an estimated four million additional executive, administrative, and professional workers to receive overtime pay if they worked over 40 hours weekly.
Following this court decision, the overtime salary threshold reverts to the $35,558 standard from 2019 during President Trump's first term. Although the Biden administration could appeal this decision, it is unlikely that president-elect Donald Trump's administration will pursue it after his inauguration on January 20.
Littler Mendelson attorneys representing businesses and trade associations challenging the rule stated: “With the upcoming change in presidential administration, we predict that under new leadership the DOL would likely abandon any appeal and allow the lower court’s decision to stand.”
They further noted: “Going forward, it is less clear whether the Trump administration will revisit some or all of the rule, repealing it entirely or perhaps adopting a different formulation.”
Attorneys Kathleen McLeod Caminiti and T.J. Hagood Tighe from Fisher Philips law firm advised employers on future compensation strategies: “Your strategy moving forward may depend on the steps you’ve already taken in anticipation of the OT rule coming online,” they wrote.
Caminiti and Tighe added: “You may have worked through your decision tree, reclassified some employees to non-exempt, raised salaries for others to meet the July 2024 threshold and communicated your plan to comply with the major salary hike set for January 1.”
They cautioned employers about potential repercussions: “Although you may have the legal right to revert to the status quo depending on your circumstances, rolling back changes now could result in a blow to employee morale. Moreover, before making any major moves you may want to see what happens with a potential appeal and how the new administration will respond.”
