DOL Increases Salary Threshold for Overtime Exempt Employees
On April 23, 2024, the U.S. Department of Labor (“DOL”) announced its final rule altering certain regulations relating to Section 13(a)(1) of the Fair Labor Standards Act (“FLSA”). The FLSA governs federal minimum wage and overtime requirements for employers. Section 13(a)(1) of the FLSA exempts from the minimum wage and overtime pay requirements “any employee employed in a bona fide executive, administrative, or professional capacity.” To be considered exempt, employees generally 1) must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed and 2) the employee’s job duties must primarily involve executive, administrative, or professional duties (as outlined in the regulations). Section 13(a)(1) also exempts “highly compensated” employees from FLSA’s minimum wage and overtime requirements. The “duties test” for highly compensated employees is less stringent than the duties test for standard salaried employees; however, highly compensated employees must meet an additional total annual compensation threshold to be exempt.
The April 23rd final rule raises the threshold salary required to be considered for the above exemptions. Specifically, the final rule revises the standard salary level for the exemptions to follow the following schedule:
Date | Standard Salary Level |
Before July 1, 2024 | $684 per week (equivalent to $35,568 per year) |
July 1, 2024 | $844 per week (equivalent to $43,888 per year) |
January 1, 2025 | $1,128 per week (equivalent to $58,656 per year) |
July 1, 2027, and every 3 years thereafter | To be determined by applying to available data the methodology used to set the salary level in effect at the time of the update. |
Similarly, the final rule raises the annual compensation threshold for the highly compensated employee exemption:
Date | Highly Compensated Employee Total Annual Compensation Threshold |
Before July 1, 2024 | $107,432 per year, including at least $684 per week paid on a salary or fee basis. |
July 1, 2024 | $132,964 per year, including at least $844 per week paid on a salary or fee basis. |
January 1, 2025 | $151,164 per year, including at least $1,128 per week paid on a salary or fee basis. |
July 1, 2027, and every 3 years thereafter | To be determined by applying to available data the methodology used to set the salary level in effect at the time of the update. |
The DOL plans to automatically update these earnings thresholds every three years with current wage data to maintain their effectiveness. The final rule will require employers to pay overtime to employees who no longer fit within the statutory exemptions due to the increased salary/compensation thresholds.
The final rule goes into effect July 1, 2024 and may be found here: https://bit.ly/45zBHia. Employers with questions about minimum wage and overtime requirements should contact Nikole Canute, Scott Dwyer, Nate Wolf, Kimberly Large, Dominic Clolinger, or Kathryn Stegink as soon as practicable.
