The U.S. Department of Labor (DOL) issued its Final Rule to increase the minimum salary requirements to qualify for “white collar” exemptions from overtime pay under the Fair Labor Standards Act (FLSA).

Effective July 1, 2024, the salary threshold for exempting bona fide executive, administrative, or professional (EAP) employees from federal overtime pay requirements will rise from the current $684 per week ($35,568 annually) to $844 per week ($43,888 annually). Effective January 1, 2025, the threshold will increase to $1,128 per week ($58,656 annually).

Additionally, the total annual compensation requirement for exempt highly compensated employees will increase from $107,432 per year to $132,964 per year on July 1, 2024, and then to $151,164 on January 1, 2025.

The salary thresholds will be updated every three years to reflect current earnings data, beginning July 1, 2027.

Implications for Employers

With little time to prepare for the increases, employers should conduct a thorough review of their current workforce to identify exempt employees whose salaries fall below the newly established minimum salary threshold. Employers may opt to increase the salary of affected employees to meet the new threshold or reclassify them as non-exempt and eligible for overtime.

Additionally, employers should evaluate their payroll system to identify necessary modifications to accommodate the new salary thresholds and prepare for future increases.

Importantly, a federal court may enjoin the DOL from enforcing the Final Rule while the legal challenges of interested parties are pending. Therefore, while it is imperative for employers to start planning their compliance strategies, they should also monitor any developments related to the Final Rule between now and July 1, 2024.

For assistance in reviewing your current FLSA exemptions and the impact of this new rule on your workforce, please contact a member of the Labor and Employment Group at AGHL: Jim Pirages, Eileen Caver, Evan Bonnett, or Maryjo Pirages Reynolds.