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:
Although the Final Rule will almost certainly be challenged in court, employers should take the following steps in light of the new rule:
- Consider an internal review of employee salaries to determine if any employees will fall below the new minimum salary thresholds.
- 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.)
- 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:
- 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;
- 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.
*The salary requirement does not apply to doctors, teachers, and lawyers.
A copy of the new regulations may be obtained from the Department of Labor’s website at www.dol.gov.