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Ward Damon

Employers Beware – Salary Threshold Increasing For Exempt Employees

Ward Damon

Apr 2024

The Department of Labor (“DOL”) has issued a final rule that will significantly raise the minimum salary requirements for exempt employees under the Fair Labor Standards Act (FLSA). Exempt employees include those who work in executive, administrative and professional capacities, commonly referred to as the “white collar” exemptions. This law, should it go into effect, also includes an increase for those individuals who qualify as highly compensated employees under the FLSA. As a result, the DOL anticipates that approximately four million workers will be entitled to overtime.

Background:  The FLSA requires that most employees receive overtime pay for hours worked over 40 hours in a work week; however, certain employees are exempt from this requirement. To qualify for an exemption, employees must satisfy both the FLSA’s salary requirement and duties test.  There is no change to the duties test under this amendment.

The salary threshold for exempt employees will be raised by this new rule.  The current salary threshold for exempt employees is set at $684 per week, approximately $35,568 per year.  The final rule significantly increases the minimum salary level for those exempt employees.

The increase will take effect in two stages over six months, beginning July 1, 2024. First, the minimum salary requirement will increase to $844 per week, approx. $43,888 annually. Then, on January 1, 2025, the salary level will increase to $1,128 per week, or approx. $58,656 annually. The final rule also increases the total annual compensation threshold for highly compensated employees to $132,964 on July 1, 2024, and on January 1, 2025, it will increase to $151,164. The final rule provides for automatic updates every three years to reflect current earnings data, beginning July 1, 2027.

While this change does not take effect until July 1, 2024, and could still face legal challenges as other laws have previously faced, now is a smart time for employers to audit their current classification of exempt employees to ensure that exempt employees will meet the higher required salary.

Should you have any questions regarding the above amendments or wish to discuss auditing your current classifications, please contact our attorneys in our Employment Practice Group, Phil Werner at pwerner@warddamon.com or Bari Goldstein at or bgoldstein@warddamon.com.

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