Court Decisions Impact Overtime and BOI Filings

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.

Expanded Overtime Protections for Workers

Last year, the U.S. Department of Labor published a proposed rule expanding overtime protections to a wider population of employees.

Under existing Department of Labor rules, full-time salaried workers earning less than $35,568 annually, or $684 per week, are guaranteed overtime pay.  The proposed rule would increase the salary threshold to $55,000 annually, or $1,059 per week.

Department of Labor projections indicate that this change will create overtime protections for an additional 3.4 million employees.  The new rule also increases the minimum salary for the highly compensated employee exemption from $107,432 annually to $143,988 annually. 

This rule may be finalized as early as April and take effect as early as June.

Similar changes to overtimes rules and exemptions have already taken effect in the State of New York in recent months.

In December of 2023, the New York State Department of Labor increased the minimum salary thresholds for exempt executive and administrative employees in New York City and its surrounding counties to $62,400 annually, or $1,200 per week.  Throughout the rest of New York State, the salary threshold for this same population of employees increased to $1,124.20 per week, or approximately $58,458.40 per year.

These thresholds will continue to increase incrementally in 2025 and 2026.

Employers impacted by these changes should review their employee salaries and payroll practices to ensure compliance.

Now may be a good opportunity to compile a list of employees impacted by these changes and decide whether to raise their salaries to meet the new thresholds or convert them to non-exempt status.  This is only part one of an employer’s review.  Employers should also consider employees’ job duties and responsibilities to determine whether their current duties and responsibilities qualify for an exemption.

Adjustments to employee compensation and exempt status can impact a company’s budget, so consider including personnel from human resources, legal, and finance in these discussions.