By Immy Singh, Esq. and Emily J. Paisley, Esq.
A federal court has vacated the Department of Labor’s (“DOL”) recent rule change to the Fair Labor Standards Act (“FLSA”), which will have a significant impact on school districts. The Court vacated a rule change that expanded overtime eligibility by raising the salary threshold on July 1, 2024, and was set to further raise the salary threshold on January 1, 2025. As a result, the salary thresholds for exempt employees are now back to the previous levels. So, what does this mean for districts moving forward?
Background
Under the FLSA, employees in bona fide executive, administrative, and professional positions (“EAP Employees”) are not required to be paid overtime if they meet a specified salary threshold. In school districts, EAP Employees typically include non-academic administrators (e.g., transportation directors and cafeteria supervisors).[1]
The rule was set to increase the salary threshold on January 1, 2025 (to $58,656 per year), after previously raising the threshold just six months ago on July 1, 2024 (to $43,888.00 per year). However, following the Court’s ruling, as summarized below, both increases are now invalid, and the salary thresholds will return to previous levels: $35,568 per year for EAP employees.
The Court’s Decision
The Court’s ruling came after a lawsuit was brought in the State of Texas suing the DOL, arguing that the changes to the salary level exceeded the Department’s authority under the FLSA. Ultimately, the Court agreed, ruling that the DOL exceeded the authority delegated by Congress in enacting the rule. While Congress granted the DOL the authority to define and delimit the EAP exemptions, the Court ruled that these exemptions should focus on an employee’s duties and the nature of their work, rather than solely on their salary. By imposing a minimum salary threshold, the rule effectively eliminated the consideration of job duties.
Additionally, the Court found that the automatic increases in the salary thresholds every three years violated the Administrative Procedures Act, which requires a notice-and-comment process for rulemaking.
What Does This Mean for School Districts?
While the Court’s ruling could be appealed, for now, the salary thresholds have returned to much lower levels. This means that if an EAP Employee earns $35,568 per year ($684 per week) or more, that employee is no longer required to be paid overtime under the FLSA.
Districts and schools should be prepared to communicate any changes to employees. For districts that had already adjusted employee compensation by amending contracts, the Court’s decision will not affect those amendments. For districts that planned on requiring employees to track hours for overtime, that tracking may no longer be required. If you have any questions, do not hesitate to consult with legal counsel as appropriate to ensure compliance.
[1] Under the FLSA, teachers and “academic” administrators are subject to their own special rule.
