EMPLOYER ALERT – DOL Approves Large Increases to “Salary Test” to Qualify for White Collar Overtime Pay Exemptions: Effective July 1, 2024

On April 23, 2024, the U.S. Department of Labor (DOL) introduced a new rule to raise the minimum salary level for employers to claim the white-collar overtime exemptions under the Fair Labor Standards Act (FLSA), beginning July 1, 2024.  The new rule (found here) will change which employees must be paid overtime if their salary remains below the minimum. The FLSA allows three white-collar exemptions: executive, administrative, and professional. The regulations provide for a duties and salary test to meet the exemptions.

Currently, the minimum amount to meet the FLSA’s salary test is $35,568 ($684 per week). This will increase to $43,888 ($844 per week) on July 1, 2024, and to $58,656 ($1,128 per week) on January 1, 2025. The new rule also increases the Highly Compensated Employee (HCE) overtime exemption from $107,432 to $132,964 on July 1, 2024, and to $151,164, on January 1, 2025.  The rule provides for future changes to the earning thresholds every three years.

The new rule may face challenges in the courts which could delay the effective date.  If the rule is not delayed, employers may need to adjust compensation structures for affected employees and consider reclassifying the employees to non-exempt. It may also be a good time for employers to fully review their compensation and overtime pay practices to confirm compliance with the FLSA’s sometimes complicated provisions.  Wage and hour lawsuits and DOL investigations remain a significant risk to all employers large and small.