GRAND RAPIDS, Mich. — Separated by a time zone (or two) and more a thousand miles, the states of Michigan and Texas live largely separate lives, though a recent ruling from a federal court in The Lone Star State will have a significant impact for many in the mitten (and the nation).
On November 15, a federal judge in Texas struck down a Biden administration rule that raised the minimum salary for salaried employees in the US, expanding overtime eligibility in the process.
The Department of Labor rule was set to go into effect in two phases. On July 1, 2024, the minimum salary for salaried employees (also known as exempt employees) increased from $35,568 a year to $43,888 a year. On January 1, 2025, it was set to increase to $58,656 a year.
In effect, the department's action was considered to be a burden for employers and a bonus for employees. Around four million people in the US were suddenly in a position to receive a significant salary increase or become eligible for overtime pay.
"People were putting their budgets together thinking, 'Do I need to increase the base salary for all these employees? If I can't afford it, then I'm going to have to convert those people to hourly and pay them overtime," said Mark Smith, a business and employment attorney at Rhoades McKee, a Grand Rapids-based law firm.
The rule was challenged in several US courts but went into effect in all states except Texas, Smith says, where U.S. District Judge Sean Jordan issued an injunction.
Months later, Judge Jordan struck down the rule, determining it was not within the Department of Labor's authority.
As a result, employers in Michigan and across America no loner have to meet the $58,656 mark by New Year's Day. Technically, they no longer have to abide by the $43,888 minimum that went into effect over the summer, either.
"Whether that will be a pill that is well swallowed by employees is another issue," Smith said. "It's not really a legal issue, it's whether the employees who tasted that higher compensation are going to be willing to go back to the lower level."
While the ruling is likely to be appealed, Smith says, the Department of Labor may "abandon" the rule altogether when President-elect Donald Trump takes office.
"There's a pretty wide expectation,' Smith said. "I think for the foreseeable future, the minimum salary for executive, administrative and professional employees is going to be at this $35,000 level."
As the calendar nears Christmas, the attorney considers the court decision in holiday-themed terms.
"While salaried employees who would have received the increase will view the ruling as a lump of coal in their holiday stocking, employers can go into the holidays without having to make hard decisions regarding hour reductions, demotions, or job cuts that would certainly start the year on a bad note for everyone else," Smith wrote in a release.
