Salary Threshold for Exempt Employees Increased: Will Your Exempt Employees Meet the Threshold?

As discussed more fully in our November 14, 2023, Employer Alert (Employer Alert), the U.S. Department of Labor (USDOL) proposed a final rule that would increase the salary required for certain exemptions under the Fair Labor Standards Act (FLSA), including the administrative, executive, and professional exemptions (white collar exemptions).  

On April 23, 2023, the USDOL released the final rule, raising the salary requirement for the white-collar exemptions from $684 per week (approximately $35,568 per year) to $43,888, effective July 1, 2024. In January 2025, the salary requirement will increase to $58,656. After that, the rule provides for automatic updates to the salary requirement every three years.

The final rule also raises the minimum salary for highly compensated employees from $107,432 to $132,964, effective July 1, 2024. On January 1, 2025, it will increase again to $151,164 and, like the exemptions above, will be updated every three years.

Is Your Business Impacted?

Most likely, your business will be impacted by this rule change. While this law is a federal law, most business are covered by the FLSA and must comply. However, the rule will face legal challenges and until those legal challenges are resolved the rule will not come into effect.

While the legal challenges play out, businesses should review the salaries paid to exempt employees and classification analysis to determine what steps they will take to come into compliance with the new rule, if it becomes effective. Compliance options could include increases salaries of exempt employees or reclassifying exempt employees as nonexempt and paying overtime for any time worked over 40 hours in a workweek. Other options are available as well and to explore all options and the unique nature of your business, consult with an employment law attorney.

P|K Tuned-In provides general legal information, not legal advice.  You should consult your attorney for guidance specific to your particular situation.