On April 23, 2024, the U.S. Department of Labor (DOL) announced a final rule to amend current requirements employees must satisfy to qualify for an overtime exemption under the Fair Labor Standards Act (FLSA). The final rule will take effect on July 1, 2024.

Increased Salary Level

The FLSA exemptions apply to individuals in executive, administrative, professional, and some outside sales and computer-related occupations. Some highly compensated employees may also qualify for the FLSA white-collar overtime exemption.

To qualify for this exemption, employees must satisfy the standard salary level test, among other criteria. This salary level is a wage threshold that white-collar employees must receive to qualify for the exemption:

Starting July 1, 2024, the DOL’s final rule increases the standard salary level from:

• $684 to $844 per week ($35,568 to $43,888 per year); and
• $107,432 to $132,964 per year for highly compensated employees.

On Jan. 1, 2025, the standard salary level will then increase from:

• $844 to $1,128 per week ($43,888 to $58,656 per year); and
• $132,964 to $151,164 per year for highly compensated employees.

Automatic Updates

The DOL’s final rule also includes mechanisms allowing the agency to automatically update the salary level thresholds without having to rely on the rule making process. Effective July 1, 2027, and every three years thereafter, the DOL will increase the standard salary level. The agency will apply up-to-date wage data to determine new salary levels.

Impact on Employers

The first salary level increase in July is expected to impact nearly 1 million workers, while the second increase in January is expected to affect approximately 3 million workers. Employers should become familiar with the final rule and evaluate what changes they may need to adopt to comply with the rule’s requirements. Legal challenges to the rule are anticipated, which may delay the final rule’s implementation.

Highlights and Important Dates

April 23, 2024

The DOL announces a final rule amending the current requirements employees must satisfy to qualify for FLSA overtime exemptions.

July 1, 2024

The standard salary level for employees will increase from $684 to $844 per week ($35,568 to $43,888 per year) and from $107,432 to $132,964 per year for highly compensated employees.

Jan. 1, 2025

The standard salary level for employees will increase from $844 to $1,128 per week ($43,888 to $58,656 per year) and from $132,964 to $151,164 per year for highly compensated employees.

July 1, 2027

The DOL will start automatically updating the standard salary level every three years.

Frequently Asked Questions and Answers

Employers should become familiar with the final rule and evaluate what changes they may need to adopt to comply with the rule’s requirements. We've put together a comprehensive outline of answers to FAQs for your review and convenience.

Access the FAQ overview HERE

Summary

The latest DOL ruling signifies a significant change in federal overtime exemptions by raising the salary limits for executive, administrative, professional, and highly compensated employees. This adjustment is aimed at providing fairer compensation and ensuring that more workers are eligible for overtime pay. Employers should carefully review their current salary structures and job classifications to ensure compliance with the new regulations. Additionally, they may need to reassess their workforce management strategies to accommodate these changes effectively. Overall, this ruling underscores the importance of staying informed about labor law updates to maintain legal compliance and support a fair and equitable workplace for employees.