Court Decisions Impact Overtime and BOI Filings

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In April of 2024, we reported on a finalized Department of Labor rule expanding overtime protections under the Fair Labor Standards Act.  Specifically, the rule updated the salary requirement of the overtime exemption test so that employee making an annual salary of $58,656.00 would be automatically eligible for overtime pay any time they worked more than 40 hours a week.  Previously, the maximum salary threshold was $35,568.00.

The rule was scheduled to go into effect on January 1, 2025.  In the meantime, employers were advised to review their employee salaries and consider making changes in advance of the rule change to ensure compliance.

In November 15, 2024, a US District Court for the Eastern District of Texas decision invalidated the Department of Labor’s final rule.  This means that the old salary threshold remains in effect.  The Department of Labor has the ability to appeal the ruling, but it remains to be seen whether the Department will pursue such a challenge under the new presidential administration.

At this time, employers who had not yet made any salary changes no longer need to do so.  Employers who did make changes are able to legally reverse course on those changes on a prospective basis.  The potential negative impact on employee morale and the possibility of a successful appeal of the District Court’s decision, however, weigh against the wisdom of such reversals.

In our most recent blog post, we noted that a federal court injunction suspended the deadline for BOI reporting.  Since the publishing of that post, the Supreme Court weighed in on the legality of the Corporate Transparency Act and lifted one of the federal court injunctions indefinitely delaying the filing deadline.  Legal consensus is that, while the Supreme Court lifted one injunction, a second injunction remains in place indefinitely delaying the filing requirement.

FINCEN’s website has the following notice posted: “In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.”

Stay tuned for further legal developments on both of these topics.

BOI Filing Developments

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The Corporate Transparency Act, signed into law on January 1, 2021, established a requirement that many businesses file a Beneficial Ownership Interest Report with the Financial Crimes Enforcement Network (“FinCen”), a bureau within the US Department of the Treasury.

FinCEN’s mission is to safeguard the US financial system from illicit activity, money laundering & financing of terrorism as well as promote national security through strategic use of financial authorities and the collection, analysis and dissemination of financial intelligence. FinCen’s receipt of Beneficial Ownership Interest Reports will give FinCEN access to ownership information for many businesses registered and operating across the country, presumably aiding the Network in its mission.

There are 23 different exemptions that permit a business to avoid filing a Beneficial Ownership Interest Report. The practical result of these exemptions is to permit larger companies, publicly traded companies, and non-profit organizations from having to file. Small businesses are also exempt from filing if they meet three criteria, specifically (i) having more than 20 employees; (ii) operating a physical office in the United States; and (iii) filing federal tax returns demonstrating more than $5 million in annual gross receipts or sales.

Lawsuits ensued following passage of the law in 2021 resulting in an injunction suspending implementation of the reporting requirement. A Fifth Circuit ruling on December 26, 2024 lifted the injunction. By December 28, 2024, however, the injunction was back in place. Legal arguments before the Fifth Circuit over whether to keep the injunction in place while the broader lawsuit is heard by the full court are scheduled for March 25, 2025.

When the injunction was briefly lifted in December, January 13th became the deadline for a large majority of companies to submit their BOI reports. The deadline is once again suspended and the US business community awaits further information from the courts and FinCEN.

In the meantime, millions of US businesses have already completed their BOI reporting requirement. Business owners should discuss their strategy for BOI compliance with their legal counsel.