🚨 March 2025 Update: This is an update to our October 2024 guide, "The New 2024 Overtime Rule: A Complete Guide for Service Businesses," with critical developments affecting overtime regulations.
On April 23, 2024, the Department of Labor (DOL) issued its final overtime rule after reviewing
The rule was designed to be implemented in two phases to give employers time to adjust:
Phase 1 went into effect on July 1, 2024, with an initial increase of the salary threshold from $35,568 to $43,888
Phase 2 was scheduled for January 1, 2025, with a more substantial increase to $58,656
Future: Automatic updates every three years starting in 2027.
If your business had been preparing for the January 1, 2025 increase in overtime salary thresholds, it’s important to know that those changes are no longer in effect.
On November 15, 2024, the U.S. District Court for the Eastern District of Texas struck down the rule, effectively reversing these changes.
As a result:
The overtime exemption threshold remains at $35,568 per year ($684 per week)
The Highly Compensated Employee (HCE) exemption remains at $107,432 per year
Making salary the primary factor for overtime exemption instead of focusing on job duties
Ignoring the Fair Labor Standards Act (FLSA) requirements, which emphasize an employee’s job responsibilities—not just their salary
Judge Sean D. Jordan stated that the rule “effectively eliminates” other considerations required under the FLSA, creating a salary-only test that goes beyond what the law allows.
The Biden Administration (November 2024) and the Trump Administration (February 2025) both appealed the court decision.
Both appeals are now being reviewed by the Fifth Circuit Court of Appeals.
While the Trump administration is defending the DOL’s authority to set salary thresholds, many expect it will revise the rule to set a lower threshold in line with previous policies.
Businesses must adhere to the $35,568 per year ($684 per week) threshold for overtime exemptions
Review employee classifications to ensure they meet both salary and duties requirements
If you increased salaries: You may want to evaluate whether to maintain these increases or adjust them, considering potential impacts on employee morale
If you reclassified employees: You may want to review classification status based on current requirements
If you communicated future changes: Update employees about the reversal of planned January 2025 changes
Check state-specific laws: If you operate in California, New York, Washington, or other states with higher thresholds, you must continue complying with those regulations
Stay informed: Monitor the Fifth Circuit Court of Appeals review of the case
Seek guidance: Consult with legal counsel if you operate in multiple states with varying wage laws
The blocking of the 2024 overtime rule creates uncertainty for all employers subject to FLSA regulations. While the $35,568 salary threshold remains in effect, businesses should stay vigilant for potential changes as the court case moves forward and the Trump administration considers a new rule.
We'll continue tracking updates and sharing information about these regulatory changes.