November 18, 2024
On Friday afternoon, a federal court in Texas issued a ruling invalidating this year’s DOL overtime rule in its entirety. The ruling means that the salary threshold for exempt employees is once again $35,568 per year ($684 per month), effective immediately. This is a decrease from the $43,888 per year ($844 per week) salary threshold that had been in place since July 1. Under the now-invalid DOL overtime rule, the salary threshold was scheduled to increase to $56,656 per year ($1,128 per week) on January 1, 2025 and to be automatically reset every three years, starting on July 1, 2027.
Many North Carolina nonprofits had told the Center that the proposed increase in the salary threshold to $56,656 would create operational challenges for their organizations. Nonprofits had begun to plan for a variety of operational changes to comply with the expected increase in the salary threshold on January 1, 2025, including raising staff salaries, cutting back on working hours, and planning to reclassify some employees from exempt to non-exempt. If your nonprofit was considering making these or other operational changes to comply with the increased salary threshold of the overtime rule, you no are no longer required to do so.
As background, the Fair Labor Standards Act (FLSA) generally requires employees to be paid one-and-one-half times their regular hourly rate of pay for any hours they work in excess of 40 hours in a work week. Employees are exempt from the FLSA overtime pay requirement if they:
1. Are paid on a salary basis (i.e., they receive the same salary each week regardless of how many hours they actually work);
2. Are paid a minimum salary of the threshold set by the DOL (now set at $684 per week or $36,568 per year); and
3. Regularly perform the duties of an administrative, executive, or professional employee (see the links for more details about what each duties test entails).
The result of the presidential election means that Friday’s court decision almost certainly stops the 2024 overtime rule from ever taking effect. It is extremely unlikely that DOL in the Trump Administration will defend the rule. Under the previous Trump Administration, DOL chose not to defend an Obama-era version of the overtime rule that was struck down by the same Texas court after the 2016 election. The Trump Administration later issued its own overtime rule raising the salary threshold from $23,660 per year ($455 per week) to the now-current level of $36,568 per year ($684 per week) in 2019, the first time the salary threshold had been (successfully) increased since 2004.
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Source: North Carolina Center for Nonprofits
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