Effective July 1, 2024, the U.S. Department of Labor’s new overtime rule took effect throughout the country, except in the state of Texas (where due to ongoing litigation, Texas employees that are employed by the state of Texas are currently excluded from the rule).  Employers in the rest of the country must ensure that they pay their salaried exempt workers at least $844 per week ($43,888/year) or risk losing the “white-collar exemptions” for their executive, administrative and professional employees (the “EAP Exemption”).   The exemptions are from overtime and record keeping requirements.  Notably, the new salary threshold is a significant increase from the pre-July 1 amount of $684 per week ($35,568 annually).

In order to meet the EAP Exemption, the executive, administrative or professional employee must:

• be paid a minimum salary level, which is now $844 per week;
• be paid on a salary basis;
• perform the type of duties that are required by each of the respective exemptions. It is important to note that there are very specific requirements for each exemption and the corresponding duties required by each of them are different. 

The final DOL rule effects the salary level requirement in two phases. The first is the increase described above, which took effect on July 1, 2024. The second is effective January 1, 2025, when the minimum salary level will further increase to $1,128 per week or $58,656 a year.

The final DOL rule also impacts the so-called “highly compensated” exemption, with the salary level increasing in two phases: the first on July 1, 2024 when it increased from $107,432 to $132,964, and the second on January 1, 2025 when it will increase again to $151,164. The highly compensated exemption is similar to the EAP Exemption in that the employee must "customarily and regularly" perform at least one of the bona fide exempt duties of an executive, administrative, or professional employee, and the employee's primary duty must be office or nonmanual work.

Finally, the DOL rule provides that the salary thresholds describe above will increase automatically every three years automatically beginning in 2027.  That is a radical departure from past DOL rulemaking in this arena. 

As mentioned above, while a Texas federal court issued an order preventing the rule from going into effect as to Texas public employees (the plaintiffs in that case), the court declined to issue a nationwide ban. 

There are several other legal challenges that have been brought in an effort to invalidate the rule.  While it is possible that one of those courts will invalidate the rule and issue a broader stay of its implementation, it is unclear what that will mean for employers who have already increased the salaries of their exempt employees to comply with the salary requirements. Will they then roll those back?  It is a conundrum for sure.

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