Pursuant to a final rule issued by the United States Department of Labor (“DOL”) on April 26, 2024, specific changes regarding minimum wage and overtime exemptions under the Fair Labor Standards Act (“FLSA”) will be going into effect on January 1, 2024.
Currently, certain executive, administrative, and professional workers are exempt from minimum wage and overtime pay requirements under the FLSA if they (1) are paid on a salary basis at a rate of not less than $884 per week and (2) perform specific duties that are exempt under the FLSA and corresponding regulations. Employees of companies who are subject to the FLSA and are not exempt under this test are required to be paid time-and-a-half for any hours worked more than forty hours in a week unless they are exempt under other regulations under the FLSA.
The weekly salary rate of $844 equates to an annual salary of $43,888. This threshold has been in effect since July 1, 2024. However, effective January 1, 2025, the threshold will increase to $1,128 per week (equivalent to a $58,656 annual salary).
The rule also increases the salary threshold for the highly compensated employees exemption from $132,964 per year (including at least $844 per week paid on a salary or fee basis) to $151,164 per year (including at least $1,128 per week paid on a salary or fee basis), effective January 1, 2025.
These thresholds will then be updated every three years, with the next update set for July 1, 2027, barring any changes to the rule in the interim.
It is important to note that these salary thresholds do not apply to all employees, including doctors, lawyers, teachers, and outside sales employees.
In preparation for setting 2025 employee compensation, employers should begin developing a plan to address these changes if they have employees who will be impacted by these threshold adjustments and perform specific duties that are exempt under the FLSA. The attorneys at Erickson Sederstrom can assist in determining how these changes will impact your business and how to address these changes when they go into effect. Employers can also stay up to date by visiting the Department of Labor website’s Wage and Hour Division Section for articles regarding rule changes, explanations, and other guidance to help employers remain compliant with the ever-changing landscape of federal regulations.