In latest edition of The Wright Toolbox:
New Final Rule Increases FLSA Overtime Exemption Salary Limits
On April 23, 2024, the Department of Labor (“DOL”) issued a final rule changing the overtime exemption thresholds under the federal Fair Labor Standards Act (“FLSA”). The new rules implement significant revisions including increasing the standard salary level for executive, administrative and professional employees, increasing the highly compensated employee (“HCE”) total annual compensation threshold, and adding to the regulations a new mechanism that will allow for automatic updating of the salary and compensation thresholds to reflect earnings growth. The effective date for portions of the new rules is July 1, 2024, while other sections will not become effective until January 1, 2025. In summary, the changes are as follows:
Effective July 1, 2024, the minimum salary required for the executive, administrative and professional employees’ exemptions from overtime will increase from $684 per week to $844 per week (equivalent to $43,888 per year). Employers will continue to be permitted to use nondiscretionary bonuses, incentive payments and commissions to satisfy up to 10 percent of the minimum salary requirement for the administrative, professional and executive exemptions, as long as these forms of compensation are paid at least annually.
Effective July 1, 2024, the minimum total compensation requirement for the HCE exemption will increase to $132,964 per year, including at least $844 per week that must be paid on a salary or fee basis.
Effective January 1, 2025, the minimum salary required for the executive, administrative and professional employees’ exemptions from overtime will increase from $844 per week to $1,128 per week (equivalent to $58,656 per year).
Effective January 1, 2025, the minimum total compensation requirement for the HCE exemption will increase to $151,164 per year, including at least $1,128 per week that must paid on a salary or fee basis.
The DOL estimates that in the first year after the new rules become effective, approximately 1 million employees who earn at least $684 per week, but less than $844 per week, will be impacted by the initial update, and approximately 3 million employees who earn at least $844 per week, but less than the new standard salary level of $1,128 per week, will be impacted by the subsequent application of the new standard salary level. The DOL also estimates that 292,900 employees who are currently exempt under the HCE test, but do not meet the standard test for exemption, will be affected by the proposed increase in the HCE total annual compensation level.
Finally, the new rules include a mechanism to automatically update the salary and total compensation thresholds every three years to be determined by the DOL using earnings data published by the U.S. Bureau of Labor Statistics. The next update will take place on July 1, 2027.
If you have any questions regarding this subject, please contact any member of the WCS Employment & Labor Law Practice Group.