DOL Dramatically Increases Salary Threshold for Exempt Employees Under FLSA

The Department of Labor (DOL) has issued a final rule that significantly increases the salary threshold for the white-collar exemption under the Fair Labor Standards Act (FLSA). The white collar exemption covers the executive, administrative, and professional exemptions.

For a position to be exempt under the FLSA’s white collar exemption, it must meet the following three tests:

• Be paid on a salary basis;
• Be paid at least the designated minimum weekly salary; and
• Perform certain duties.

Prior to the new final rule taking effect, the minimum weekly salary is $684, or $35,568 per year. On July 1, 2024, the minimum weekly salary increases to $844, or $43,888 per year. On January 1, 2025, the minimum weekly salary increases again to $1,128, or $58,656 a year. Under the final rule, the minimum weekly salary will be increased every three years, starting July 1, 2027.

The final rule also increases the salary requirement for the highly compensated employee (HCE) exemption. Currently, the HCE exemption’s annual salary requirement is $107,432. On July 1, 2024, the annual salary requirement will increase to $132,964. On January 1, 2025, the annual salary requirement will increase to $151,164. Under the final rule, the annual salary requirement will also be increased every three years, starting on July 1, 2027.

Member companies should review the salaries of their exempt employees that fall under the white collar or HCE exemptions. If the salaries of any of your employees covered by those exemptions do not meet the new July 1, 2024, minimum salary requirements (e.g., $844/week for white collar, $132,964/year for HCE), you will need to decide if you want to increase their salary, so they meet the new minimum on July 1, 2024, or convert those employees to non-exempt.

Employees that fall under the HCE exemption who do not meet the new salary requirement of the HCE exemption on July 1, 2024, might also meet the duties test for one of the white collar exemptions (executive, administrative, or professional), and could maintain their exempt status under one of those exemptions at a much lower salary threshold.

There have already been a number of lawsuits filed in Federal courts challenging the DOL’s final rule. It is very likely that one of the courts where a lawsuit has been filed will issue an injunction temporarily suspending the DOL’s final rule. We anticipate that just prior to July 1, 2024, an injunction will be announced. If that is the case, employers will not need to do anything on July 1, 2024, until the matter has been resolved in the courts.

UEA attorneys are available to address your questions and concerns regarding the DOL’s final rule increasing the salary threshold for the white collar and HCE exemptions. UEA can also assist you with evaluating your salaried exempt employees to ensure compliance with the final rule.

We will also keep you apprised as new developments unfold, especially regarding the legal challenges to this final rule.