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April 25, 2024
DOL Raises the Minimum Salary for Over Time Eligibility
Earlier this week, the Department of Labor (“DOL”) increased the minimum threshold salary for employees to be classified as “exempt” from overtime under the Fair Labor Standards Act (“FLSA”). Exempt employees are those whose job responsibilities fulfill white collar executive, administrative and professional positions who are not eligible for overtime.
For employers looking to keep their salaried employees classified as “exempt,” the DOL will require such employees earn a minimum salary of $43,888 ($844 per week) effective July 1, 2024 and a minimum salary of $58,656 ($1,128 per week) effective January 1, 2025. Although this two- part approach affords employers some time to evaluate their employees’ status under the FLSA and to increase wages where appropriate, this 65 percent increase is a big jump and is higher than business groups anticipated. Also concerning is that this new minimum salary requirement is not geographically tailored to account for local wage rates.
Confronted with this increased overhead cost, some employers may decide to change workers’ classifications from exempt to non-exempt. Overtime compensation is based on the employee’s regular rate of pay, not the employee’s hourly rate of pay. The regular rate of pay includes compensation such as bonuses, commissions and incentive pay. In such circumstances, employers should be sure to provide employees with training on timekeeping requirements and rules against working off the clock.
The new rule also increased the salary threshold for highly compensated employees (HCE) to be exempt from overtime from $107,432 to $132,964 on July 1, 2024 and to $151,164 on January 1, 2025.
With the intention of avoiding such dramatic increases in the future, the new rule includes a three- year automatic adjustment mechanism for increasing the minimum salary for exempt employees and the HCE. The next adjustment date is July 1, 2027.
Prior attempts by the DOL to increase the minimum salary threshold were successfully challenged in courts throughout the country. We anticipate that this final rule likewise will face challenges in court, however, employers should not count on implementation of this rule being stayed while it makes its way through the judicial process. Now is a good time for employers to review exemption determinations and job descriptions to ensure compliance with this dynamic landscape. Hill Wallack’s employment law attorneys are well versed in this area of law and are here to help you through this process. For questions, please contact: Susan L. Swatski, Esq. sswatski@hillwallack.com; David J. Truelove, Esq. dtruelove@hillwallack.com; and Suzanne M. Marasco, Esq. smarasco@hillwallack.com.
