A Texas Federal Court overturned the Department of Labor’s increased maximum thresholds to qualify for overtime. What this may mean for your district:

On November 15, a federal district court in Texas issued an order vacating rules enacted by the US Department of Labor (DOL) which would have raised the thresholds for what is known as “white collar overtime exemptions. The implications of this could have an effect, albeit very limited, on school districts in Michigan.

Under the Fair Labor Standards Act, unless exempted, employees are able to collect overtime pay at a rate of at least one- and one-half times their hourly rate for work over 40 hours per week. To be exempt, an employee must serve in an executive, administrative or professional capacity and be salaried at a rate that exceeds a minimum threshold (the EAP salary test). FLSA exempts physicians, lawyers, teachers and outside sales workers who may be exempt if they satisfy other duties and credential requirements from having to meet the EAP salary test.

Prior to July 1, 2024, that threshold was $35,568 annually ($684 per week). As of July 1, the threshold increased to $43,888 annually ($844 per week). An increase was scheduled to take place on January 1, 2025, which would have raised the threshold to $58,656 annually ($1,128 per week). Both increases were struck down, reverting the maximum threshold to be eligible for overtime back to $35,568 on an annual basis.

The vast majority of school personnel and administrators are exempt by statute or rule from the FLSA overtime requirements. However, in some rare instances, a salaried school employee may not qualify for the exemption. This determination would be very fact-specific and nuanced. This could have an effect on how to address that individual’s compensation.

It is expected that the DOL will appeal this decision. MASB will continue to monitor the issue as it works its way through the courts. If you have any questions on this or any other matter, please contact us.