The US Department of Labor (DOL) announced a Final Rule raising the minimum salary and annual compensation thresholds to qualify for executive, administrative, or professional (White Collar) exemptions from overtime under the Fair Labor Standards Act (FLSA). The Final Rule also increased the salary requirements for the highly compensated employee exemption (HCE Exemption). Under the Final Rule, an initial increase in salary thresholds will take effect on 1 July 2024, and a full increase to the thresholds will take effect on 1 January 2025.
The Final Rule also introduces changes in the methodologies used to calculate and periodically automatically update these salary thresholds to reflect current earnings data, which employers can expect to be applied every three years.
If the Final Rule becomes effective, employers must increase the salaries of any employee treated as exempt under the White Collar and HCE exemptions to maintain their exempt status. However, this final rule uses a methodology that was found invalid in 2016 and will likely face legal challenges.
The scheduled increases are as follows:
1 July 2024
$43,888 per year ($844 per week) for White Collar Exemption
$132,964 per year, which includes at least US$844 per week (paid on a salary or fee basis) for highly compensated employee exemption
1 January 2025
$58,656 per year (US$1,128 per week) for White Collar Exemption
$151,164 per year, which includes at least $1,128 per week (paid on a salary or fee basis) for highly compensated employee exemption
Employers should monitor the Final Rule to be aware of any legal challenges or other developments that may impact its effective dates or terms. At the same time, employers should analyze the compensation of their workforce to determine whether they need to increase exempt employees' salaries so they do not forfeit their exempt status when the Final Rule takes effect or convert them to nonexempt employees. Employers should also ensure that they implement internal procedures so they may comply with the automatic salary increases outlined in the Final Rule. If employers fail to take action to increase salaries in advance of the effective date, exempt employees may lose their exemption and be subject to the overtime and recordkeeping requirements of the FLSA. Failure to comply with these provisions can result in significant penalties under the FLSA and state wage payment laws.
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