The U.S. Department of Labor recently issued a final rule that would increase the required salary thresholds for employees to be exempt from overtime requirements under the Fair Labor Standards Act (FLSA). The increases to salary thresholds are significant and will exceed several state salary thresholds—including Maine’s—that have typically exceeded federal requirements.
While a legal challenge to the rule is likely, as set forth below, dates of enforcement of the new rules are imminent and employers are strongly encouraged to begin to plan accordingly.
To be considered exempt from overtime pay requirements under the FLSA, an employee must meet an applicable duties test, be paid on a salary basis, and receive a rate of pay that meets or exceeds the applicable salary threshold. The DOL’s final rule calls for salary threshold increases effective July 1, 2024, with additional increases effective January 1, 2025, as follows:
In addition, the final rule increases the salary threshold for highly compensated employees. The current threshold is $107,432 per year, which will increase to $132,964 on July 1, 2024. Beginning January 1, 2025, employees must earn $151,164 per year to qualify as a highly compensated employee. Additional increases will occur for all exemptions in 2027 and every three years thereafter based on new earnings data. Employers can still cover up to 10% of the salary requirement through the use of non-discretionary bonuses or incentive payments so long as said payments occur at least annually.
Maine employers should note that the new federal salary thresholds exceed Maine’s thresholds ($816.35 per week, or $42,450.20 per year, effective January 1, 2024), which have for years exceeded federal requirements. To maintain FLSA compliance, covered employers will need to make sure that exempt Maine employees are paid pursuant to the new rates established in the final rule. If employees’ earnings do not meet the threshold, they risk losing their exempt status and will be eligible for overtime pay.
