Any Israeli company with U.S.-based employees must comply with the Fair Labor Standards Act (FLSA) and ensure that employees are properly classified as “exempt” (from overtime) or “non-exempt” (and entitled to overtime). In 2024, the U.S. Department of Labor (DOL) passed a final rule increasing the minimum salary thresholds for overtime exemptions, but in Nov. 2024, a Texas Court vacated DOL’s new rule. Employers now have the option to treat an employee earning more than $35,568/year but less than $43,888/year as non-exempt, or exempt (assuming the employee meets the “salary basis” and “job duties” requirements of the FLSA). This Alert discusses these recent developments.

On Nov. 26, 2024, the DOL filed a notice of appeal following the Eastern District Court of Texas’ decision to vacate the department’s final rule Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees (2024 Rule) that had significantly increased minimum salary thresholds for overtime exemptions. The appeal responds to Judge Sean Jordan’s Nov. 15, 2024, Memorandum Opinion and Order in State of Texas, et al. v. DOL, et al., Case No. 24-0049 (E.D. Tex.), which expressly stated: “The 2024 Rule is hereby SET ASIDE and VACATED” (EDTX Ruling).

The EDTX Ruling nullifies both the July 2024 salary level increase and the scheduled Jan. 1, 2025, increase under the 2024 Rule. This development may create compliance challenges for employers nationwide and marks the third time in less than 10 years that courts have challenged DOL attempts to increase the salary threshold for executive, administrative, professional (EAP) and highly compensated employee (HCE) exemptions under the Fair Labor Standard Act (FLSA). To understand the nationwide impact of the EDTX Ruling and determine next steps, a brief review of the applicable law and the DOL’s previous attempts to increase the salary threshold may be instructive.

Read the full GT Alert.