DOL final overtime rule increases exempt salary threshold

The dollar amounts of everything seem to be going up. This now includes the salary threshold for exempt employees under the federal Fair Labor Standards Act (FLSA) based on a new U.S. Department of Labor’s Wage and Hour Division (WHD) final rule.

The thresholds are as follows:

The FLSA exempts from the minimum wage and overtime pay requirements any employee employed in a bona fide executive, administrative, or professional capacity. The exemption is commonly referred to as the “white-collar” or executive, administrative, or professional (EAP) exemption. Computer professionals are also included.

To be classified as exempt, employees must meet the following three tests:

• They must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (the salary basis test);
• The amount of salary paid must meet a minimum specified amount (the salary level test); and
• Their job duties must primarily involve executive, administrative, or professional duties as defined by the regulations (the duties test).

The new rule focuses on the second element.

Highly compensated threshold also increases

The rule also increases the threshold for highly compensated employees (HCE). Beginning July 1, 2024, the HCE threshold is $132,964 per year. This increases to $151,164 on January 1, 2025.

Levels update every three years

Starting July 1, 2027, these salary thresholds will update every three years. The Secretary of Labor will publish a notice in the Federal Register at least 150 days before each future update of the earnings requirements.

The WHD will also, no later than their effective dates, publish the updated amounts on its website.

This final rule does not involve a change to the FLSA poster.

Key to remember: Employers will need to revisit the details of their exempt employees to ensure that they remain exempt or will be entitled to overtime.