Client Alert: Department of Labor Substantially Increases Salary Threshold for Overtime Exemptions
April, 2024 - United States of America
On April 23, 2024, the U.S. Department of Labor (DOL) released its long-awaited final rule (“Final Rule”) which drastically increased the salary threshold for exempt employees under the Fair Labor Standards Act (FLSA). According to the DOL, this change will result in millions of workers becoming eligible for overtime pay if an employer does not increase the salary threshold.
Under the FLSA, “white collar” workers who make more than a certain salary per week and work in a bona fide executive, administrative, or professional capacity are exempt from overtime pay. To be properly classified as an exempt employee under the FLSA, an employee must qualify under the duties test[1] and receive the required salary threshold. Currently, the salary threshold is $684 per week (i.e. $35,568). The DOL’s Final Rule significantly changes the overtime exemption requirements by increasing the minimum salary thresholds for white-collar employees by 65%.[2]
The increase for “white collar” employees will take place in two stages: (1) on July 1, 2024, the salary threshold will be increased to $844 per week (i.e., $43,888 per year) and (2) on January 1, 2025, the salary threshold will be increased to $1,128 per week (i.e., $58,656 per year).
Highly compensated salary thresholds will likewise be increased in two stages: (1) on July 1, 2024, the new salary for highly compensated employees will be $132,964 per year and (2) on January 1, 2025, the new salary for highly compensated individuals will be increased to $151,164 per year.
Unlike past increases, these salary threshold increases will be automatically updated every three years to reflect the current earnings data beginning on July 1, 2027.
Employers must begin identifying which positions will be affected by the salary increase and determine the impact of potential overtime wages in comparison to the required salary increase. As always, it is a good business practice to routinely evaluate whether a position has been properly classified as exempt and meets all other requirements under the FLSA as positions and duties may change over time. Just because an employee receives a “salary” does not mean that he or she is exempt under the FLSA. Likewise, this change offers the employer an opportunity to reevaluate proper staffing to ensure monitoring and control over labor costs associated with overtime wages, in particular for those employees who will be reclassified as non-exempt.
We are continuing to check the implementation of the Final Rule. There is always a possibility that litigation may impact the enforcement, or deadlines imposed by the Final Rule.
If you have any questions about this Client Alert, please do not hesitate to contact the Labor and Employment team at Greenspoon Marder LLP.
[1] https://www.dol.gov/agencies/whd/fact-sheets/17a-overtime
[2] https://www.dol.gov/agencies/whd/overtime/rulemaking
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