More Dollar for White Collar: DOL Issues New Overtime Rules

T. Matthew Miller
Bradley Arant Boult Cummings LLP
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The Department of Labor issued a Final Rule on April 24, 2024, addressing the salary requirements for the overtime (“white collar”) exemptions under the Fair Labor Standards Act. The Final Rule increases the standard salary level for exempt status and the highly compensated salary level effective July 1, 2024, and again on January 1, 2025. The Final Rule also provides for future updates of these levels every three years to reflect current earnings data. The DOL’s chart of increases is included below:

DATE

STANDARD SALARY
LEVEL

HIGHLY COMPENSATED EMPLOYEE TOTAL ANNUAL
COMPENSATION THRESHOLD

Before July 1, 2024

$684 per week (equivalent to $35,568 per year)

$107,432 per year, including at least $684 per week paid on a salary or fee basis.

July 1, 2024

$844 per week (equivalent to $43,888 per year)

$132,964 per year, including at least $844 per week paid on a salary or fee basis.

January 1, 2025

$1,128 per week (equivalent to $58,656 per year)

$151,164 per year, including at least $1,128 per week paid on a salary or fee basis.

July 1, 2027, and every 3 years thereafter

To be determined by applying to available data the methodology used to set the salary level in effect at the time of the update.

To be determined by applying to available data the methodology used to set the salary level in effect at the time of the update.

Although the Final Rule will almost certainly be challenged in court, employers should take the following steps in light of the new rule:

  1. Consider an internal review of employee salaries to determine if any employees will fall below the new minimum salary thresholds.
  2. Take this opportunity to review employees’ duties and whether they meet the exemption. (This is a good opportunity to correct any existing issues without raising red flags.)
  3. Review salaries by job classification and use this opportunity to address any existing pay differentials which could be challenged under the Equal Pay Act or similar laws requiring equal pay among employees with substantially similar tenure, performance, and job duties.

Refresher on Overtime Exemption Requirement

To qualify for an exemption from the FLSA’s overtime requirements, an employee generally must meet a salary and duties test that includes:

  1. Receiving payment of a predetermined and fixed amount that is not subject to reduction because of variations in the quality or quantity of work performed — and the salary must at least meet the defined threshold;
  2. Primarily performing executive, administrative, or professional duties, as provided in the department’s regulations and applicable case law.

The FLSA regulations also provide an alternative test for certain highly compensated employees who are paid a salary, earn above a higher total annual compensation level, and satisfy a minimal duties test.

Comparison of Existing and New Rules

The following charts compare the current requirements for exemption from the Fair Labor Standards Act as an executive, administrative, professional, or computer employee with the new regulations published in the Federal Register by the Department of Labor.

Executive Employees
 

Current Test

New Test as of 7/1/24

New Test as of 1/1/25

Salary

$684 per week

$844 per week

$1,128 per week

Duties
  • The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;
  • The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and
  • The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.

Administrative Employees
 

Current Test

New Test as of 7/1/24

New Test as of 1/1/25

Salary

$684 per week

$844 per week

$1,128 per week

Duties
  • The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
  • The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

Learned Professional Employees
 

Current Test

New Test as of 7/1/24

New Test as of 1/1/25

Salary*

$684 per week

$844 per week

$1,128 per week

Duties
  • The employee’s primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment;
  • The advanced knowledge must be in a field of science or learning;
  • The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

*The salary requirement does not apply to doctors, teachers, and lawyers.

Creative Professional Employees
 

Current Test

New Test as of 7/1/24

New Test as of 1/1/25

Salary

$684 per week

$844 per week

$1,128 per week

Duties
  • The employee’s primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.

Computer Employees
 

Current Test

New Test as of 7/1/24

New Test as of 1/1/25

Salary

$684 per week Or $27.63/hour

$844 per week or $27.63/hour

$1,128 per week or

$27.63 an hour

Duties
  • The employee must be employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field performing the duties described below;
  • The employee’s primary duty must consist of:
    • The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;
    • The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications;
    • The design, documentation, testing, creation or modification of computer programs related to machine operating systems; or
    • A combination of the aforementioned duties, the performance of which requires the same level of skills.

Highly Compensated Employees
 

Current Test

New Test as of 7/1/24

New Test as of 1/1/25

Salary

$107,432 annually (including at least $684 weekly salary)

$132,964 annually (including at least $844 weekly salary)

$151,164 annually (including at least $1,128 weekly salary).

Duties
  • Customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee identified in the standard tests for exemption.

A copy of the new regulations may be obtained from the Department of Labor’s website at www.dol.gov.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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