Employment Law Update:  DOL Issues Final Overtime Rule

On Tuesday, April 23, 2024, the Department of Labor announced the final rule to raise the salary threshold for overtime exemptions under the Fair Labor Standards Act (FLSA).

Under the FLSA, employees may be exempt from overtime pay if they meet specific requirements related to job duties and salary requirements, as defined in the FLSA and FLSA regulations.  These exemptions include the executive, administrative, professional, and highly compensated employee (HCE) exemptions.  While the duties requirements vary between these exemptions, they all utilize a salary basis test, which establishes a salary threshold that employees must be paid to be eligible for exemption.  The HCE exemption additionally includes a threshold for total annual compensation.  To meet the exemption requirements, an employee must meet both the salary basis test and the job duties test.

While the job duties tests remain the same under the final rule, the DOL made several changes to the salary thresholds, summarized below.  Currently, the salary threshold is $684 per week, or $35,568 annually.  For the HCE exemption, the current annual compensation threshold is $107,432.

Effective July 1, 2024:

• The salary threshold will increase to $844 per week, or $43,888 annually; and
• The HCE total annual compensation threshold will increase to $132,964.

Effective January 1, 2025:

• The salary threshold will increase to $1,128 per week, or $58,656 annually; and
•  The HCE total annual compensation threshold will increase to $151,164.

Beginning January 1, 2027, these thresholds will continue to be automatically adjusted every three years based on concurrent wage data. Any employee whose salary is below the new salary threshold on each increase date will no longer meet the requirements for exemption. 

Employers should review the salary of all of their exempt employees to determine whether their exemptions will be jeopardized by the increased salary threshold on July 1, 2024, and January 1, 2025.  Prior to each of these effective dates, employers should review their individual circumstances to determine whether to (1) increase employee salary to meet the new salary threshold or (2) reclassify the applicable employees as non-exempt and therefore eligible for overtime pay.  

If you have any questions related to this announcement or other employment law matters, contact Sarah Glaser, Chair of Lloyd Gosselink’s Employment Law Practice Group, at 512.322.5881 or sglaser@lglawfirm.com, Laura Ingram at 512.322.5848 or lingram@lglawfirm.com, or Michelle White at 512.322.5821 or mwhite@lglawfirm.com.