On April 23, 2024, the United States Department of Labor (“DOL”) announced a final rule that will increase the Fair Labor Standards Act’s (“FLSA”) minimum salary threshold for overtime and minimum wage exemptions for executive, administrative, professional, computer, and highly compensated employees. The final rule will be effective July 1, 2024.
In most cases, the FLSA requires an employer to pay an employee 1.5 times their regular rate of pay for any hours worked over 40 in a workweek. The FLSA exempts executive, administrative, professional, and computer employees from the overtime and minimum wage requirements. To qualify for the exemption, the employer must establish an employee meets specific criteria concerning their job responsibilities and receives a salary equal to or exceeding the minimum salary threshold.
The FLSA also exempts highly compensated employees from the overtime and minimum wage requirements. To qualify, the employee must regularly perform certain job responsibilities and receive a salary equal to or exceeding the minimum salary threshold.
Executive, Administrative, Professional, and Computer Employees
- Effective July 1, 2024, the minimum salary threshold will increase from $684 per week ($35,568 annually) to $844 per week ($43,888 annually).
- Then, on January 1, 2025, the minimum salary threshold will increase to $1,128 per week ($58,656 annually).
- The DOL will update the minimum salary threshold every 3 years beginning on July 1, 2027, based on available census salary data.
Highly Compensated Employees
- Effective July 1, 2024, the minimum salary threshold for highly compensated employees will increase from $107,432 per year to $132,964 per year.
- On January 1, 2025, the minimum salary threshold will increase to $151,164 per year.
- The DOL will update the minimum salary threshold every 3 years beginning on July 1, 2027, based on available census salary data.
If a salaried employee earns less than the new minimum salary thresholds, employers will need to increase the employee’s salary or reclassify them as eligible for overtime. If a salaried employee already earns more than the new minimum salary thresholds, the rule does not affect the employee’s classification and the employer will not have to increase the employee’s salary.
Of note, in 2016 the DOL attempted to increase the minimum salary thresholds using a similar method to the current final rule. After legal challenge, a federal court invalidated the 2016 rule only days before its effective date. We anticipate similar litigation will commence soon in an effort to block the current rule.
Despite the likelihood of legal challenges to the new rule, employers should prepare by reviewing their employees’ salaries and evaluating their classification policies to determine what is necessary to comply with the new overtime rule, if and when it becomes effective.
The St. Louis employment law attorneys at McMahon Berger have been representing employers across the country in labor and employment matters, including non-compete litigation and the drafting of non-compete agreements, for over sixty years, and are available to discuss these issues and others. As always, the foregoing is for informational purposes only and does not constitute legal advice regarding any particular situation or issue. The choice of a lawyer is an important decision and should not be based solely on advertisements.
