Higher Salary Thresholds Coming for FLSA Exemptions

On Tuesday, April 23, 2024, the U.S. Department of Labor (USDOL) announced a new Final Rule updating and revising minimum wage and overtime pay regulations under the Fair Labor Standards Act. Here are the key facts and changes:

• Effective Date: July 1, 2024.
• Relevant Laws: The Fair Labor Standards Act (FLSA) mandates that non-exempt employees must receive overtime pay for hours worked over 40 per workweek at a rate not less than one and one-half times the regular rate of pay.
  • Some employees are exempt from coverage under the FLSA if they meet the salary requirements and perform certain job duties.
  • Executive, administrative, or professional employees are one group of employees that may be exempt under the FLSA, provided they satisfy the salary threshold (typically referred to as the “EAP exemption.”)
• Legal Update: Starting July 1, 2024, USDOL’s new rule has increased the minimum weekly salary threshold to qualify for the EAP exemption from $684 per week to $844 per week ($43,888 annually). By January 1, 2025, the minimum salary threshold will increase again to $1,128 per week ($58,656 annually).
  • This means that employees making less than the threshold will be excluded from the EAP exemption, and thus entitled to overtime pay.
  • Starting July 1, 2024, the new rule also increases the earnings threshold for the FLSA’s highly compensated employee exemption (“HCE exemption”) from $107,421 per year to $132,964 per year. By January 1, 2025, the earnings threshold will increase again to $151,164.
  • Again, this means that highly compensated employees that make less than the threshold will be excluded from the HCE exemption, and thus entitled to overtime pay.
  • Finally, the new rule states that beginning in July 2027 the salary thresholds for both the EAP exemption and the HCE exemption will increase every three years on July 1^st of that year.
• Employer Next Steps: employers must prepare for these changes to the FLSA exemptions by July 1, 2024. We recommend employers review their workforce to identify any employees who are currently exempt from the FLSA under the EAP or HCE exemptions and determine whether they will remain exempt under the new salary thresholds. Employers should then enact a plan to comply with the increases to salary thresholds.
• Employers should also contact their Robbins Schwartz attorney with any specific questions about how these changes affect their institution.