You probably heard the news that the new overtime rule was blocked by a federal court in Texas. The ruling comes on the heels of the increase to the salary threshold for white-collar exemptions from overtime that went into effect in July 2024 and just ahead of the next milestone increase set to take effect in January 2025. The boldest news though, is that the judge not only struck down the increase to $59,000 that was set to take effect on January 1st, 2025, but he also retroactively struck down the July 2024 increase. This takes the current salary threshold back to where it was pre-pandemic at around $35,500. Here are 5 things employers need to think about as we head into 2025:
1. The Department of Labor will likely appeal the ruling, but it’s unlikely to happen before the end of the year. It’s also unlikely to be a priority for the new white house administration and the appeal will probably extend out further into 2025. Ultimately, it may not get strong traction again for the next 4 years, but we really don’t know what the future holds.
2. If you already implemented salary changes associated with the July 1st salary threshold increase, you technically have the option to reverse them; however, doing so won’t be well received by your employees and would negatively impact engagement and retention. It’s also not the best course of action to take knowing there is at least a chance of an appeal. If you choose to pursue this path, there are laws in some states that govern how you must go about proactively notifying employees about pay changes, so you’ll want to keep this in mind.
3. If you have not already implemented salary changes associated with the January 1 threshold increase, you’re in the better spot – and you’re in an even better spot still if you haven’t communicated the potential changes to employees. If you haven’t mentioned it at all, a best practice is to not bring it up. But if you have mentioned it but not implemented it, a simple acknowledgement of the latest ruling is a good idea. You could say that the upcoming changes were blocked, and all associated salary changes are on hold for the time being, but you’ll continue to monitor things as new developments occur.
4. FLSA status (exempt or non-exempt) is likely to be looked at more closely in the future, particularly when the DOL makes its appeal. If you have not recently updated job descriptions and applied the DOL tests to review FLSA status, it’s smart to add this to your HR agenda in early 2025.
5. If you don’t have an established relationship with a labor and employment attorney, this should be a priority for your business in 2025. Continued questions related to overtime and employment classifications will continue to emerge, and the growing number of changes to laws at the federal, state, and local level…particularly in states known for being more employee friendly…are tricky to stay on top of. Having legal counsel that you trust on hand to help you navigate this is critical, particularly as your business grows.
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