Employment Law

Overtime Rule Blocked: 1 Million Workers Lose New Eligibility

The federal overtime rule, which aimed to expand overtime eligibility to millions of workers, has been struck down. On November 15, 2024, U.S. District Court Judge Sean Jordan vacated the U.S. Department of Labor’s (DOL) 2024 overtime rule, which raised the salary threshold for white-collar exemptions under the Fair Labor Standards Act (FLSA). This decision not only reverts the salary threshold but also impacts more than 1 million workers who had recently become eligible for overtime pay.

What Was the 2024 Overtime Rule?

The 2024 rule proposed by the DOL sought to increase the minimum salary threshold for overtime eligibility from $35,568 annually ($684 per week) to $43,888 annually ($844 per week) as of July 1, 2024, with a planned second increase to $58,656 annually ($1,128 per week) set for January 1, 2025. It also included an automatic “escalator” provision, which would have raised the salary threshold every three years starting in 2027.

The intention behind the rule was to adjust the salary threshold to better reflect contemporary wage levels, thus expanding overtime eligibility to more workers across the United States.

Why Was the Rule Vacated?

Judge Sean Jordan ruled that the DOL overstepped its statutory authority under the FLSA by raising the salary threshold so significantly. The court found that the new rule effectively created a “de facto salary-only test” for white-collar exemptions, sidelining the duties test that traditionally determines whether an employee qualifies for overtime. Source

Additionally, the automatic escalation provision was deemed unlawful, as it bypassed the notice-and-comment period required under the Administrative Procedure Act.

Who Is Affected by the Ruling?

This decision immediately reverts the overtime salary threshold to the previous level of $35,568 annually. Employers who raised salaries or reclassified employees in anticipation of the new thresholds will need to carefully navigate next steps.

Workers who would have gained overtime eligibility under the now-vacated thresholds—approximately 1 million individuals—are no longer covered. This includes employees whose salaries fell between the $35,568 and $43,888 range or who were anticipated to benefit from the $58,656 threshold starting in 2025.

What Should Employers Do Now?

Employers are advised to:

Assess Current Payroll Practices: Ensure compliance with the reverted $35,568 threshold while considering state-specific requirements, as some states like California, New York, and Washington maintain higher salary thresholds.
Consult Legal Counsel: Before reversing any changes, seek legal advice to avoid unintended compliance issues or employee relations challenges.
Communicate with Employees: If salary increases or reclassifications were implemented, provide clear communication to employees about next steps.

Looking Ahead

This ruling is a significant reminder of the evolving landscape of labor law. Employers must remain vigilant, not only in responding to federal rulings but also in navigating complex state-level requirements. For now, the $35,568 threshold is back in effect—but the broader conversation about overtime eligibility is far from over.

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