As the legal and regulatory environment surrounding labor continues to evolve, staying on top of compliance is more critical than ever—especially for small and mid-sized businesses in Houston.
When it comes to bookkeeping Houston business owners can trust, one of the core elements is aligning payroll practices with federal and state labor laws.
A key topic right now? The pending changes—and the legal pushback—around federal overtime rules.
In this blog, we’ll break down what’s happening with the U.S. Department of Labor’s proposed changes, what they mean for employers in Houston, and how you can prepare your business effectively to stay compliant while protecting your bottom line.
Understanding the Overtime Rule Changes
In 2024, the U.S. Department of Labor (DOL) introduced a final rule aiming to increase the salary threshold for overtime exemptions under the Fair Labor Standards Act (FLSA).
The proposed changes included:
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Raising the standard salary level from $684 to $844 per week (equivalent to $43,888 annually) effective July 1, 2024.
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Further increasing it to $1,128 per week or $58,656 a year and the HCE total annual compensation threshold increases to $151,164.
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Implementing automatic updates to these thresholds every three years.
However, in a surprising turn, a federal district court in Texas vacated the rule in November 2024.
The court argued that the DOL had overstepped its authority by placing excessive weight on salary levels instead of focusing on job duties, as intended by the FLSA
Implications for Houston Employers
For now, the previously proposed 2025 threshold increase is on hold. However, that doesn’t mean you should disregard the changes entirely.
Here’s what to consider:
1. No Immediate Salary Adjustments Required
Since the court struck down the rule, employers are not obligated to meet the January 2025 threshold of $1,128/week.
The current standard of $684/week remains in effect—at least for now.
2. Legal Uncertainty Continues
The DOL has appealed the decision, and the case could eventually reach the Fifth Circuit Court of Appeals.
If reversed, the higher thresholds could still take effect. Houston employers must remain vigilant, as this landscape may shift again in the coming months.
3. Potential Retroactive Liability
If the appeal overturns the decision and reinstates the rule, businesses could potentially be on the hook for back pay, unless the DOL issues a new effective date.
This highlights the importance of careful payroll documentation and accurate bookkeeping now—just in case.
Best Practices for Compliance
To navigate these changes effectively:
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Conduct Regular Audits: Review employee roles and salaries to ensure proper classification under FLSA guidelines.
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Stay Informed: Monitor updates from the DOL and legal developments related to overtime regulations.
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Consult Professionals: Engage with HR consultants or legal experts to ensure compliance and adapt to any future changes.
Why Overtime Compliance Should Still Be a Priority
Even without the new rule in place, overtime compliance is still a legal obligation that can lead to costly lawsuits if mishandled.
The Wage and Hour Division (WHD) of the DOL continues to aggressively pursue cases involving unpaid wages, misclassification of employees, and improper recordkeeping.
Houston-based businesses should take this opportunity to:
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Revisit job descriptions and actual duties to verify FLSA compliance.
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Audit pay structures and timekeeping systems.
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Train supervisors and HR staff on proper classification and overtime protocols.
To better understand local labor standards and payroll best practices, you can also refer to our article on adhering to Houston’s employment laws, which includes practical payroll and bookkeeping insights.
The Role of Payroll Software and Bookkeeping Support
Adapting to regulatory changes is significantly easier when your business has a reliable payroll system in place.
Automating pay calculations, time tracking, and tax withholdings reduces the margin for error and protects you during audits.
We recently published a guide to selecting the right payroll software for your Houston business that includes features to look for, compliance tools, and recommendations based on business size.
Outsourcing your bookkeeping is another step forward. Working with experienced professionals ensures that:
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Employee classifications are correctly tracked and documented.
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All overtime payments are calculated accurately.
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Payroll filings are submitted on time, minimizing penalties.
What Employers Should Do Now
With all the uncertainty surrounding these rules, here’s a short checklist to keep your business protected:
✔ Audit All Employee Classifications
Make sure every exempt employee actually meets both the salary and duties test under current FLSA guidelines.
✔ Review Compensation Structures
Even if the rule is struck down permanently, it may indicate a long-term trend toward more stringent overtime eligibility. Consider if proactive salary adjustments make sense for your business.
✔ Update Job Descriptions and Offer Letters
Clearly document the roles and responsibilities associated with each employee to support classification decisions.
✔ Stay Plugged IntoUpdates
Stay aware of the latest information on ongoing appeals and potential implementation dates.
✔ Consult with a Partner
Navigating these changes alone can be risky. Consider working with a team like Profitline to ensure your payroll information is accurately integrated into your bookkeeping and your records stay compliant—no matter what changes arise
What’s Next?
While the January 2025 increase in overtime thresholds has been temporarily blocked, the landscape remains fluid.
Regulatory challenges and legal appeals mean that employers cannot afford to become complacent.
By taking proactive steps today—auditing your employee classifications, upgrading your payroll tools, and seeking professional bookkeeping support—you can ensure your business is prepared for any outcome.
We specialize in helping Houston businesses like yours stay compliant with federal and local employment laws.
Whether you need support with classification audits, or bookkeeping systems, our team is here to guide you.
Let’s talk about how we can help your business stay compliant and grow confidently.
Contact us today to schedule a free consultation!