On Friday, November 15, a federal judge in Texas invalidated the DOL’s rule increasing the exempt salary thresholds.  This means that the mandatory increase that went into effect in July, the additional increase scheduled for January 1, and the automatic increases every three years are currently blocked nationwide.

The minimum federal exempt salary level for executive, administrative and professional employees defaults immediately to the prior rate of $684/week ($35,568/year).  While it is possible that the current administration will appeal the ruling, the appeal would be filed in the 5th Circuit where it is unlikely that the appeals court would reinstate the rule, or that a judge in another jurisdiction could come to an opposite conclusion that would elevate it to the US Supreme Court.

For employers that rely on the highly compensated employee exemption in states that allow it, that increase has also been vacated and is, for the moment, returning to $107,432.

Employers now have to decide how best to move forward and how to communicate those decisions to employees.  The simplest solution is to keep the July changes in place, honor any increases already communicated to employees, and either move forward or pause plans that have not yet been communicated to employees.  Another option is to return some employees to exempt status, with caution around the potential for discrimination based on inconsistent decisions, as well as the potential for significant backlash if salaries are reduced or some employees have come to rely on overtime to supplement their income.  Keep in mind that some states require prior notice of changes in exempt status.

The judge on Friday emphasized the importance of the job duties test, so this would be a good time to review job descriptions, actual duties, and the statutory job duty requirements.  As a reminder, in general the federal EAP duties tests include the following (state tests are similar, but may vary):

Executive: Employees must have a primary duty of managing the enterprise or a department or subdivision of the enterprise; must customarily and regularly direct the work of at least two employees; and must have the authority to hire or fire, or their suggestions and recommendations as to the hiring, firing, or changing the status of other employees must be given particular weight.

Administrative:  Employees must have a primary duty of performing office or nonmanual work directly related to the management or general business operations of the employer or the employer’s customers, and their primary duty must include the exercise of discretion and independent judgment with respect to matters of significance.

Professional: Employees must have a primary duty of work requiring knowledge of an advanced type in a field of science or learning customarily acquired by prolonged, specialized, intellectual instruction and study, or must specialize in a few other similarly, highly specialized fields, such as teaching, computer analytics, and engineering.

The federal court ruling in Texas has no effect on any state thresholds – they are still in effect and subject to scheduled increases, especially in states such as California, New York, Colorado, and Washington.