On November 15, 2024, a federal court in Texas ruled that the Department of Labor had exceeded its authority with the latest rule increasing the minimum salary for exempt employees. This decision completely invalidates the July 1 salary increases, cancels the additional hike planned for January 1, 2025, and eliminates the automatic increases set to happen every three years.
In short, the rule has been thrown out, and the minimum salary thresholds have reverted to the pre-July 1, 2024 levels. This means most executive, administrative, and professional employees must earn at least $684 per week ($35,568 annually) rather than the $844 weekly rate required by the 2024 rule. Similarly, the highly compensated employee threshold is back to $107,432 per year instead of $132,964.
However, remember that the rule most beneficial to employees is the one you must follow. If your employees reside in a state with a higher minimum amount than the federal requirement, follow that guideline.
But if you can follow the federal guidelines and want to roll back to the pre-July 2024 figures, consider the following:
- If your business increased salaries or reclassified employees to comply with the July rule, you can now reverse those changes or halt any plans for adjustments in January. Keep in mind, though, that you cannot retroactively reduce pay or alter employee classifications.
- Notify employees about any upcoming pay or classification changes in advance, ensuring compliance with any state or local notice requirements. Transparency is key here.
- Be mindful of how these changes might affect employee morale. To ease potential concerns, frame these decisions as being driven by shifting federal regulations and the needs of the business—this helps employees understand that the changes aren’t arbitrary.
Clear communication and thoughtful planning will go a long way in managing this transition effectively.
