A federal court ruling has recently vacated updated salary ceilings for white-collar workers. The ruling voided those updated ceilings and rolls the minimum salary threshold back to pre-July 2024 levels. The new threshold now stands at $684 per week or $35,568 per year. Prior to the ruling taking effect, the salary threshold was $1,128 per week or $58,656 per year.
These overtime exemption rules apply to salaried “white-collar” workers that include executive, administrative, professional, and computer employees. These types of employees are generally paid a fixed salary that does not fluctuate depending on how many hours they work per week. However, white-collar employees may be entitled to overtime compensation depending upon a variety of factors. The primary factor to consider is the employee’s salary.
Changes implemented by the U.S. Department of Labor (“DOL”) in July 2024 and January 2025 resulted in millions of additional white-collar workers being eligible for overtime pay – provided they worked over 40 hours in a workweek and met certain criteria, primary of which is earning less than the applicable salary threshold. Those changes were challenged in federal court by the State of Texas. The U.S. District Court for the Eastern District of Texas vacated the DOL’s 2024 rule, lowering the salary threshold for overtime eligibility from $58,656 back down to $35,568 per year — a difference of more than $23,000. Texas v. United States Dept. of Labor, 738 F.Supp.3d 807, 827 (E.D. Tex. 2024). Based upon this decision, fewer white-collar employees are eligible for overtime compensation.
Why Are Workers Paid Overtime?
The Fair Labor Standards Act (FLSA), signed into law in 1938, brought sweeping labor reform to the United States. In 1966, the Fair Labor Standards Amendment of 1966 implemented overtime – if an employee worked more than 40 hours per workweek, they would be entitled to one and one-half times their regular hourly rate for any additional hours worked. 29 U.S.C. § 207(a)(1).
Many people assume that this only matters for hourly employees. However, white-collar employees may also qualify for overtime pay. Unlike hourly workers, white-collar employees are normally exempt from FLSA’s overtime pay requirement if they meet a three-part test.
This test evaluates their salary basis (if they are paid a salary), salary level (they must meet a specific annual minimum) and job duties (they must perform mainly executive, administrative, or professional functions). See Helix Energy Sols. Group, Inc. v. Hewitt, 598 U.S. 39 (2023).
What Changed in 2024 and 2025?
In July 2024 and January 2025, white-collar salary thresholds were updated to allow additional white-collar employees to qualify for overtime pay:
|
Date |
White Collar Salary Threshold |
|
July 1, 2024 |
$844 per week (Equivalent to $43,888 per year)
|
|
January 1, 2025 |
$1,128 per week (Equivalent to $58,656 per year) |
29 C.F.R. § 541.600. However, the Texas litigation has resulted in these changes being vacated, returning to the pre-2024 threshold level of $684 per week or $35,568 per year.
Businesses and employees should understand classifications to know whether an employee is exempt or non-exempt under the Fair Labor Standards Act. Compensation levels are just one factor to be considered but are applicable to all white-collar employees. Salary levels and job duties should be carefully evaluated to understand exempt vs. non-exempt employees.
Plakas Mannos Is Here If You Need Guidance with Business and Employment Law in Northeast Ohio
Our team of business and employment lawyers is here to assist business owners and employees alike with these overtime compensations and FLSA changes. If you believe that you or your company may face employment, contract, or business issues because of these policies being reversed, please do not hesitate to contact us.
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