DOL issues final rule raising minimum salary threshold for FLSA’s “white collar” exemptions
The Department of Labor issued a final rule that will make it more expensive for employers to keep overtime-exempt employees on the payroll. On April 26, 2024, the DOL published a final rule that increases the minimum salary that executive, administrative and professional employees must be paid to be exempt from the Fair Labor Standards Act’s overtime pay requirements. The final rule also increases the total annual compensation threshold for the FLSA’s highly compensated employee (HCE) exemption. According to the DOL, in the first year after implementation of the final rule, approximately 4 million workers will either become eligible for overtime pay or have their salary increased.
The current standard salary level for the FLSA’s white collar exemptions is $684 per week ($35,568 per year). Under the final rule, on July 1, 2024, the standard salary level will increase to $844 per week ($43,888 per year). On January 1, 2025, it will increase again to $1,128 per week ($58,656 per year). On July 1, 2027, and every three years thereafter, the standard salary level will be updated by applying current earnings data to the final rule’s salary methodology. (The DOL will publish a notice announcing the updated salary level amount at least 150 days before the update takes effect.)
The final rule also increased the salary threshold used to determine whether a worker qualifies for the FLSA’s HCE exemption. On July 1, 2024, the annual compensation level needed to be an exempt HCE will increase from $107,432 to $132,964. On January 1, 2025, the annual compensation level will increase to $151,164. On July 1, 2027, and every three years thereafter, the HCE total annual compensation threshold will be updated by applying current earnings data to the final rule’s salary methodology. (The DOL will publish a notice announcing the updated salary level amount at least 150 days before the update takes effect.)
According to the DOL, in addition to expanding overtime protections to lower-paid salaried workers, the final rule ensures predictability. Regularly updating salary threshold to reflect changes in earnings protects against the future erosion of overtime protections. It is worth noting that the final rule, or parts of it, are likely to face legal challenges from those opposing its implementation. As a result, the final rule’s effective date may be extended, perhaps indefinitely.
Click here to read the published final rule. Click here for additional information from the Department of Labor. Since change often creates uncertainty, employers should carry Employment Practices Liability Insurance that includes limited wage & hour coverage.
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