The U.S. Department of Labor (DOL) issued its Final Rule, increasing the salary threshold for overtime exemption under the Fair Labor Standards Act (FLSA). This affects the “white-collar” exemptions for administrative, executive, or professional employees. The DOL estimates that approximately three to four million U.S. workers will either become eligible for overtime or receive salary increases to retain a classification of “exempt”.
Key Dates
- Effective July 1, 2024, the exempt salary threshold rises to $844/week ($43,888 annually). Employees earning less are eligible for overtime pay for hours worked over 40 per week (about 1 and a half days).
- Effective January 1, 2025, the exempt salary threshold increases to $1,128/week ($58,656 annually).
- The Final Rule also impacts an exemption for highly compensated employees who do not meet other elements of the “white-collar” exemptions. Starting July 1, 2024, for highly compensated employees, the minimum salary is $132,964, and starting January 1, 2025, will be $151,164.
The Final Rule also establishes automatic increases to these thresholds, beginning July 1, 2027, and every three years thereafter.
Practice Tip
Given the July 1, 2024 effective date, employers should immediately identify exempt employees who earn less than $844 per week (while employers can use the $43,888 annualized amount as a point of reference, the threshold amount is a weekly requirement) and either adjust their pay to meet the new threshold or shift them to “non-exempt” status. It’s important to communicate changes to employees so they are aware of their rights, especially those employees who may shift from exempt to non-exempt status. They will now be required to report their hours and be entitled to rest breaks, meal breaks, and overtime pay.
