DOL Salary Threshold Tossed. Now What?

Key strategies for wage audits, I-9 compliance, and union avoidance

In 2024, the Department of Labor (DOL) challenged employers to reconsider how they classified independent contractors and how much they paid salaried exempt employees. However, a federal judge vacated the DOL’s new salary threshold in November, and the Trump Administration will likely issue a new proposed rule, making it easier for companies to classify workers as independent contractors. While it is expected that there will be some “business-friendly” changes on the horizon, this doesn’t mean 2025 will be smooth sailing for employers. It is likely that 2025 is going to be a bumpy ride, so buckle up and plan your trip appropriately. 

The Road Traveled: A Brief Overview of the Vacated Salary Threshold Rule

In April 2024, the DOL published a new rule that required employers to increase salaried exempt employees’ pay to an annual minimum of $43,888 per year by July 1, 2024, and again to $58,656 by January 1, 2025. In November 2024, a federal court in Texas vacated the DOL’s salary threshold rule, reverting the salaried exempt threshold to $35,568 per year. 

While employers who increased salaries to $43,888 in July can technically reduce salaried exempt thresholds back to $35,568, we recommend against it based on practical concerns such as morale and inflation. Remember, just because you can does not mean you should!  

Pack Appropriately: Tips for HR Planning in 2025

1. Many of you will face a wage and hour collective (class) action. According to Reuters, 43.4% of all class actions in 2023 were wage and hour cases, up from 22.5% in 2020. Even more astonishing, 80% of employers surveyed reported experiencing at least one wage and hour class action in the past five years. This means it is more likely than not that your company will face a class action, and there is a 43% chance the cases will deal with wages owed and hours worked. Our advice is to pack your bags for the uncertainties ahead. 

What you should do: Audit your exempt/non-exempt classifications. Suppose you are going to classify an employee as exempt from overtime. In that case, you must make sure they meet the Fair Labor Standards Act’s (FLSA) three-factor test: (1) the employee is paid the salary threshold (which is higher in some states that use a “living wage” as opposed to the federal minimum wage); (2) the employee’s job duties fit within one of the enumerated exemptions – and there are many – established by the FLSA; and (3) the employee is paid the same salary every week without being subject to improper deductions. 

Start by requiring managers to work with your HR team to update descriptions for the job profiles that are reported to them and determine whether job duties fall within an exemption. Warning: If a manager says, “This is how they have always been paid,” you have a problem. If the position fails to meet the duties test, the employees must be classified as non-exempt and entitled to overtime. If the position does meet the duties test, then make sure it also meets the other two factors (salaried level and basis) of the three-factor test. 

After ensuring all job profiles are properly classified, confirm that your pay practices comply with the Fair Labor Standards Act (FLSA) and state laws. We often see employers taking improper deductions for exempt employees, such as reducing employee pay if an exempt worker is out of paid time off or reducing pay when employees are not working a full 40-hour schedule. The proper way to make deductions from a proper exempt employee’s salary is minimal and should be done with the utmost care. 

Conversely, ensure that non-exempt workers are paid for all their work time, including after hours or before and after their shift’s start time. Simply stated, there should be no “off-the-clock” work performed by non-exempt employees.  

Finally, make sure all compensation, such as shift differentials and non-discretionary bonuses, are included in the regular rate of pay calculation. There are other considerations in the “regular rate of pay” for an employee, and your HR team should be well informed of those considerations.   

2. The road might be unsafe: Targeting industries for undocumented workers. It’s no secret that the Trump administration aims to increase workplace raids in search of undocumented workers. Workplaces will likely be targeted based on geographic factors and industry, with construction, agriculture, manufacturing, and hospitality in the bullseye! 

What you should do: Employers may face penalties for knowingly hiring and retaining undocumented workers, which means one thing: Conduct an I-9 audit and make sure all paperwork is in order. If you encounter errors, such as missing sections or photocopies, update them appropriately and include a memo to the file indicating what changes were made. 

Finally, if workers have expired or soon-to-expire work authorizations, work with them to update them as soon as possible. 

3. Don’t pick up hitchhikers! We saw a dramatic increase in union organizing efforts during the Biden administration. Social media has become a weapon of choice for unions seeking to get into your business. Union organizing took place on many social media platforms, where unions targeted employees on Facebook and Instagram, among other popular sites. Many employers were unaware of this “hitchhiker” riding along behind the scenes.

Employees are talking about unions, the promises of pay, and workplace changes they claim they can bring. Like any “hitchhiker” you might see on the side of the road, unions don’t tell your employees the entire story. In this case, we are sure that employees are not being told what collective bargaining means or how the loss of flexibility at work can impact everyone, even customers.  

What you should do: Employers must conduct union avoidance training for managers. This training should teach managers how to spot union organizing efforts in the early stages and educate employees about unions. 

The road ahead may be bumpy, but you can manage it with planning and proper assistance. As always, travel safely. If you have questions, don’t hesitate to contact labor and employment counsel, who can provide roadside assistance in 2025!

	Leah Stiegler is a Principal and Management-side Employment Lawyer at Woods Rogers.
	Victor Cardwell is a Principal and Management-side Employment Lawyer at Woods Rogers.