Here we go again – except this time, it’s final. For now. On July 1, the U.S. Department of Labor’s final rule increasing the standard salary threshold for overtime exemption went into effect. This rule, released on April 23, extends overtime protections to millions of workers if their current salaries have not been raised and increases the highly compensated employee’s total compensation threshold.
This final rule increases the salary threshold for salaried exempt workers – principally those covered by the executive, administrative and professional exemptions. The rule did not change the duties test for any exemptions, but it raises the minimum weekly salary to qualify for these exemptions from $684 per week to $844 per week or the equivalent salary of $43,888 per year. The required minimum salary for the highly compensated employee’s exemption – which applies regardless of job duties – is raised from $107,432 to $134,004.
A federal judge in the Eastern District of Texas has issued an injunction against the Department of Labor, preventing them from enforcing the overtime exemption final rule, but only as it would have applied to Texas government employees. The injunction does not grant relief to all employers in Texas or nationwide. The judge found that the rule likely exceeds the DOL’s authority under the Administrative Procedure Act because the Fair Labor Standards Act’s exemptions are based on employees’ salaries, not their job duties.
In summary, for all employers (other than the Texas state government) covered by the FLSA, the DOL’s final rule is now in effect. Employees paid less than the increased salary requirement must either be paid overtime or have their salaries raised to the required level. It's crucial to note that other cases challenging the final rule are pending, including one brought by Texas businesses and another in the Fifth Circuit Court of Appeals that questions the DOL's authority to issue any salary requirements. Those challenges could invalidate the DOL’s rule, but, for now, employers must comply.
Employers should also be aware that, should challenges to the DOL’s final rule prove unsuccessful, additional increases to the salary thresholds will go into effect on Jan. 1, 2025. Specifically:
- The salary threshold will increase to $1,128 per week, the equivalent of a $58,656 annual salary.
- The required minimum salary for the highly compensated employees’ exemption will increase to $151,164.
Starting July 1, 2027, these thresholds will increase every three years based on up-to-date wage data. Employees earning less than these thresholds will become entitled to overtime pay.
