By Heather R. Falks, General Counsel • Office of General Counsel
Recent developments in wage and hour standards may impact wages for certain court employees. In April 2024, the Department of Labor finalized a rule (“Final Overtime Rule”) to increase compensation thresholds for overtime eligibility. The rule was set to take effect on July 1, 2024, and additional increases were to occur on January 1, 2025. The changes to these compensation thresholds were challenged in federal court. On November 15, 2024, the U.S. District Court for the Eastern District of Texas vacated and set aside the Final Overtime Rule. Some Indiana courts may have already made changes based upon the July 1, 2024, effective date, while others may have been waiting until 2025 to make changes.
Wage & Hour Law Overview
The Fair Labor Standards Act establishes minimum wage and overtime pay. Workers are designated as either exempt or non-exempt based upon their salaries and work duties. Employees who are designated non-exempt must be paid overtime for any work that exceeds 40 hours a week. Government employees are eligible to receive compensatory time in lieu of overtime for any time worked in excess of 40 hours in a week. Some courts and counties pay court staff overtime/compensatory time for time worked in excess of 37.5 hours in a week—this is not required by law but is a benefit provided to some court employees. Employees classified as exempt are not entitled to overtime/compensatory time.
Most court employees should be designated as non-exempt unless they are in a management role with direct supervision responsibilities. Typically, the positions within the court that are classified as exempt are chief probation officers, court administrators, magistrates, commissioners, referees, and possibly some deputy chief probation officers. All other court employees should be classified as non-exempt and be eligible for overtime. It is important to note that the classification of exempt versus non-exempt is not a reflection of the importance of the employee or their role—the classification is based upon specific regulations set by the FLSA and enforced by the DOL.
The Rule
Employees are exempt from the FLSA minimum wage and overtime requirements if they are employed in a bona fide executive, administrative, or professional capacity (EAP exemptions). These terms are specifically defined by the DOL in 29 CFR part 541. To fall within one of the exemptions, the employee must generally meet three tests:
- Be paid a salary, which means they are paid a predetermined and fixed amount that is not subject to reduction because of variations in the quality or quantity of work performed
- Be paid at least a specified weekly salary level; and
- Primarily perform specific executive, administrative, or professional duties that are defined by the DOL’s regulations
The DOL’s Final Overtime Rule increased the specified salary level for employees who fall under either of the EAP exemptions. This change would have meant that an employee could no longer be considered exempt if their salary did not meet the raised minimum specified salary level. It would have required employers to either increase that employee’s pay to meet the minimum threshold requirement or change their classification to non-exempt—making the employee eligible for overtime.
Before July 1, 2024, the specified minimum salary level for the EAP exemptions was $35,568.00. Under the Final Overtime Rule, the new minimum salary level became $43,888.00 and was set to increase to $58,656.00 on January 1, 2025. The Final Overtime Rule also required increases to these minimum salary amounts every three years.
Options Now
Many employers made changes to salaries and classifications in anticipation of the July 1, 2024, enforcement date. The November 2024 federal court decision has now vacated the Final Overtime Rule for all employers nationwide. It is unlikely that the Final Overtime Rule will be reinstated under the new president’s administration. This leaves employers wondering what to do now.
If the county and/or court made salary changes to meet the July new salary threshold amounts, it is not recommended that those raises be rescinded. If it was determined that it was beneficial to the county and/or court to increase an employee’s salary to meet the new standard rather than to change their classification to non-exempt, that signifies the employee frequently works overtime, and it was more cost-effective to increase their wages rather than pay them overtime. If this evaluation was made, then the increase in wages was likely fair based upon the workload that specific employee carries.
If the county/court decided to change an employee’s classification from exempt to non-exempt rather than to increase their salary, it is not recommended that this decision be reversed. If the employee is not working excessive overtime and is not a manager of others, then this employee really should already be classified as non-exempt. It is always safer to classify an employee as non-exempt if there is a question about their classification status or level of pay.
If an employee was reclassified as non-exempt in response to the new rule, and the employee is now accruing significant overtime, an evaluation should be conducted to determine why that is occurring. The employee should be required to get prior approval before working overtime. If overtime is approved because it is necessary due to workload, then it may be time to hire additional staff to handle the workload. It would be risky to change this specific employee’s classification back to exempt under these circumstances because that would give the impression that the change in classification is being made to avoid overtime.
Since it is unlikely that the Final Overtime Rule will be reinstated under the new president’s administration, there is no need for employers to make additional increases to salaries to meet the January 1, 2025, increased threshold salary amounts.