On April 23, the U.S. Department of Labor (“DOL”) announced its long awaited final rule that increases the minimum salary threshold requirements for the “white collar” Executive, Administrative, and Professional (“EAP”) and Highly-Compensated Employee (“HCE”) overtime exemptions under the federal Fair Labor Standards Act (“FLSA”). The final rule does not modify the exemptions’ “duties” test.
The final rule comes after the DOL issued a proposed rule last year setting forth new thresholds for the EAP and HCE exemptions. During the 60-day public comment period, the DOL received more than 33,000 comments on the proposed rule. Now that the DOL has taken public comment into account, the agency chose a final rule that sets the new salary thresholds even higher than initially proposed.
The final rule implements the following new salary thresholds, which begin July 1, 2024, then increase on January 1, 2025:
Going forward, these salary thresholds will be updated every three years based on then-current earnings data. The next scheduled update is July 1, 2027, and the DOL will publish a notice of the new salary thresholds at least 150 days before they are to take effect.
The DOL estimates the aggressive new thresholds will result in four million currently exempt employees becoming newly entitled to overtime. The estimated financial impact on employers in year one is $2.9 billion, with $1.4 billion in familiarization and managerial costs, and $1.5 billion in additional overtime pay or increased salaries.
Now that the final rule has been published, there likely will be legal challenges. While legal challenges may delay implementation of the rule, or result in modifications to the final rule, employers should begin preparing for the July 1, 2024, and January 1, 2025, changes by reviewing the salary levels of their exempt employees to identify those who will be impacted by the new thresholds.
Webinar
(Over)time is of the Essence: How to Comply with the New DOL Salary Thresholds under the FLSA
Under the DOL’s final rule that significantly increased the salary thresholds required to qualify for the EAP and HCE exemptions under the FLSA, both thresholds will phase in over the next several months. The EAP threshold increases to $844 per week ($43,888 annually) effective July 1, 2024, followed by an increase to $1,128 per week ($58,656 annually) on January 1, 2025, and similarly, the HCE threshold will increase to $132,964 as of July 1, 2024, and $151,164 as of January 1, 2025.
This webinar will cover:
- The DOL’s increase to the salary thresholds for employees to be exempt under the EAP and HCE exemptions of the FLSA.
- The newly created mechanism to automatically update the thresholds every three years.
- Steps employers can take to prepare for the upcoming deadlines.
- The odds of a successful legal challenge.
Click here to view a recording of the webinar.