Status of DOL Overtime Rule

On April 23, 2024, the Department of Labor released a final rule that, beginning July 1, 2024, called for an increase in the salary threshold for exempt executive, administrative and professional employees. The final rule also raised the threshold for highly compensated employees.

On November 15, 2024, a Texas court struck down the DOL’s overtime expansion rule in a ruling that applies nationwide, not only in Texas. The rule has been struck down in its entirety, meaning the salary threshold for the executive, administrative, and professional exemptions has returned to $35,568. The decision could be subject to appeal/reversal. Unless and until that occurs, employers no longer need to comply with the increased thresholds.

About the Rule

On April 23, 2024, the Department of Labor released a final rule that, beginning July 1, 2024, called for an increase in the salary threshold for exempt executive, administrative and professional (“E/A/P”) employees to $844 per work, which translates to an increase to $43,888 per year from $35,568 per year. The final rule also raised the threshold for highly compensated employees from $107,432 to $132,964 annually.

The final rule includes increases, effective January 1, 2025, of $1,128 per week ($58,656 per year) for exempt executive, administrative and professional employees and $151,164 per year for highly compensated employees. Every three years, beginning January 1, 2027, salary thresholds will automatically update based on the following new methodologies — for exempt positions: the salary threshold at the 35th percentile of full-time non-hourly workers in the lowest-earning Census region, currently the South; and for highly compensated employees: 85th percentile of all non-hourly workers nationally.

To qualify for the E/A/P overtime exemption, an employee must meet three requirements: (1) perform work that primarily involves executive, administrative, or professional duties as defined in DOL regulations (“duties” prong), (2) be paid a predetermined fixed salary not subject to reduction due to work quality or quantity (“salary basis” prong) and (3) receive a minimum salary amount (“salary threshold” prong). Current employees qualifying for the duties test will not qualify for the E/A/P overtime exemption if they are paid a salary that is less than the new salary level. Consequently, employers are faced with either (1) reclassifying the employees with salaries falling short of the new minimum salary as nonexempt, overtime-eligible employees, or (2) increasing salaries to meet the DOL’s new salary thresholds. Employers should evaluate current exempt employees’ salaries to determine whether they will need to raise exempt employees’ salaries to meet the increased minimums. Otherwise, employees who do not meet the new thresholds should be reclassified to nonexempt status and they will be overtime-eligible.

About McDonald Carano

In 2024, McDonald Carano celebrated its 75ᵗʰ Anniversary of serving Nevada’s legal, business, government, and civic communities. More than 60 lawyers and government affairs professionals serve Nevada, national, and international clients from our offices in Reno, Las Vegas, and Carson City. McDonald Carano provides transactional, litigation, regulatory, and government affairs services to startups, corporations, private companies, trade associations, nonprofits, public entities, high-net-worth individuals, and family offices throughout Nevada. We are deeply committed to supporting local communities by volunteering our time, resources, and services, including pro bono legal services, to nonprofit organizations, charitable foundations, and public service entities. We are proud to be your Nevada law firm since 1949.