The US Department of Labor (DOL) published changes to the Fair Labor Standards Act (FLSA) that will affect which employees are eligible for overtime pay. To be exempt from overtime, employees must be paid a weekly salary meeting a minimum threshold amount and perform certain duties as described in the Department’s regulations.
The final rule increases the salary threshold for executive, administrative, and professional exemptions in two steps effective July 1, 2024, and January 1, 2025. The rule also provides for regular reviews of the salary threshold effective July 1, 2027, and every three years thereafter.
The salary threshold requirements for executive, administrative, or professional exemptions, and highly compensated employee (HCE) exemptions are outlined below.
| Date |
Standard Salary Level |
Highly Compensated Employee Total Annual Compensation Threshold |
| Before 07/01/2024 |
$684 per week ($35,568/ year) |
$107,432 per year, including at least $684/week on a salary or fee basis. |
| 07/01/2024 |
$844 per week ($43,888/ year) |
$132,964 per year, including at least $844/week on a salary or fee basis. |
| 01/01/2025 |
$1,128 per week ($58,656/year) |
$151,164 per year, including at least $1,128/week on a salary or fee basis. |
| 07/01/2027; increasing every three years thereafter |
*To be determined by applying to available data the methodology used to set the salary level in effect at the time of the update. |
*To be determined by applying to available data to the methodology used to set the salary level in effect at the time of the update. |
* At least 150 days before a scheduled update to the standard salary level and the HCE total annual compensation requirement, the DOL will publish in the Federal Register a notice with the new earnings levels described above.
Employers have a range of options for responding to the updated thresholds established in this rule. One important thing to note is that simply raising salaries above the new threshold will not guarantee exemption from overtime pay. Even for employees with salaries greater than the new threshold amount, job duties must be considered to understand whether employee job duties meet the requirements for exempt status. While the job duties test (see document) remains the same, it is a good time to reevaluate how all positions are classified to ensure compliance.
For each employee affected, consider a strategy to:
- increase the salary of the employee to at least the new salary level to retain their exempt status;
- pay an overtime premium of one-and-a-half times the employee’s regular rate of pay for any overtime hours worked;
- reduce or eliminate overtime hours; or
- use some combination of these strategies.
This ruling does not apply in U.S. territories.
Challenges to this ruling are expected. We will continue to provide updates as details become available. If you have questions, consult your AGH representative.
Sources: SHRM Government Affairs; Department of Labor