Time to Take Action: Update on Federal Salary Threshold Increase for Exempt Employees

By Pawel Binczyk and Bill Wahrer

What’s happening?

The U.S. Department of Labor’s (“DOL”) long-awaited rule for the new salary levels for the administrative, professional, executive, and highly compensated employee exemptions under the Fair Labor Standards Act (“FLSA”) is now set to take effect.

As outlined in our February 2024 client alert, last year, the DOL issued a proposed rule to significantly raise the salary thresholds for employees to be considered exempt from overtime pay.   On April 23, 2024, the DOL published its final rule and the new applicable salary thresholds are even higher than originally forecasted.

What does this mean for your business?

The rule will raise the administrative exemption’s salary threshold to the equivalent of a $43,888 annual salary on July 1, 2024, and then to the equivalent of $58,656 on January 1, 2025.  Those figures are up from the current rate of $684 a week, which equates to $35,568 a year.  The rule also raises the overtime salary threshold for highly compensated employees to $132,964 in July and $151,164 in January, up from the current rate of $107,432.  Moving forward, the DOL will automatically update the thresholds every three (3) years based on new earnings data.

What actions should businesses take now?

Bottom line: more employees will be entitled to overtime compensation soon, unless employers are willing and able to provide significant salary increases.  As a result of these new salary thresholds, employers need to review their exempt employees and determine whether the proposed salary increases are manageable for their presently exempt employees or whether currently exempt employees need to be transitioned to a non-exempt designation.  As part of this analysis, employers should also be taking this opportunity to properly review and examine their exemptions for compliance with all applicable standards, including the job duties requirements.

Our employment attorneys are here to help. For more information about the federal salary threshold increase for exempt employees, contact Pawel Binczyk, Shareholder, Labor & Employment Practice Group, at pbinczyk@bernsteinshur.com, or Bill Wahrer, Associate, Labor & Employment Practice Group, at wwahrer@bernsteinshur.com.