The second increase to the salary threshold for the overtime exemption for employees employed in a bona fide executive, administrative, or professional capacity is scheduled to take effect January 1, 2025. Employers should plan now for how they will maintain compliance or risk loss of the exemption.
While litigation is pending that could impact the scheduled increase, it is unclear whether any court decision staying or invalidating the increase will be issued before January 1st. And, at this time, it is unclear if the return of the Trump Administration will eventually impact the increase. The former Trump Administration declined to implement a salary threshold increase proposed by the Obama Administration, but the former Trump Administration did increase the salary threshold by a lesser percent. Moreover, President-Elect Trump does not take office until January 20, 2025, after the increase is scheduled to take effect, so employers should be prepared to make adjustments regardless of the change in Administration.
The January 1st increase is the result of regulations issued by the U.S. Department of Labor (DOL) in April 2024. Those regulations set the following minimum salaries for white collar exempt employees:
The DOL regulations require updates to the minimum salary threshold every three years, beginning July 1, 2027. The DOL regulations also include an increase in the minimum salary for highly compensated employees. To qualify for this exemption, employees must currently receive a minimum annual salary of $132,964. Effective January 1, 2025, the minimum annual salary for highly compensated employees climbs to $151,164.
The new salary threshold is scheduled to take effect January 1, 2025, but now is the time to plan how your organization will maintain compliance with the regulations. Employers wishing to maintain flexibility in the event that a court or the new administration alters the legal landscape should not limit planning increasing salaries. DOL regulations offer some creative alternatives to traditional pay structures that may help employers navigate increasing salary minimums.
Employers should keep in mind that most of the white collar exemptions require a position to be paid on a salary basis and meet a job duties test in addition to meeting the minimum salary threshhold. In other words, paying a salary that meets or exceeds the threshold is not enough. Even highly compensated employees must meet a duties test.
