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Employment Law Update: DOL Issues Final Rule Significantly Increasing Required Salary For Exempt Employees

On Tuesday April 23, 2024, the Department of Labor issued a long expected Final Rule that substantially raises the salary threshold for salaried exempt employees under the Fair Labor Standards Act (FLSA). The FLSA mandates the payment of overtime pay to non-exempt employees who work more than 40 hours in any given work week. There are, however, exemptions for employees who meet certain defined job requirements, such as bona fide executive, administrative and professional employees, provided these employees are also compensated on a “salary basis.”
 
Being paid on a “salary basis” means that an employee regularly receives a predetermined amount of compensation each pay period on a weekly, or less frequent, basis regardless of the hours worked in that work (subject to a few exceptions). DOL regulations set the minimum required weekly salary that must be satisfied for a worker to qualify for one of the enumerated exemptions. Currently, the salary requirement is $684 per week, which works out to an annual salary of $35,568. Employees compensated below that threshold would not qualify for the exemption regardless of the nature of their job duties. 
 
Under the new Final Rule, the threshold salary will increase to $884 per week, or the equivalent of $43,888 per year, effective July 1, 2024. On January 1, 2025, the required salary will increase to $1,128 per week, or $58,656 per year. Thereafter, the required salary will be updated every three years, based on then-current earnings data. 
 
The DOL estimates that this new rule will impact approximately 3 million workers across all industries in the United States. As an added bonus, the Final Rule also raises the overtime salary threshold for highly compensated employees from the current rate of $107,432, to $132,964, effective July 1, 2024, and then again to $151,164, effective January 1, 2025. This particular provision of the regulations provides a shortened duties test for evaluating an employee’s exempt status, provided they meet the high salary threshold.
 
The FLSA is a complicated and arcane law dating back to New Deal legislation. The new changes to the salary threshold, and the automatic increases every three years, will require all employers to review the status of their current exempt employees to ensure that they meet the requirements as of July 1, and then again at the start of the New Year. Violations of the law can be costly both in terms of unpaid wages, but also litigation costs. Whiteford’s Labor & Employment Law section is available to assist clients in need of guidance in meeting the new requirements and ensuring compliance with the FLSA. 

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