Department of Labor Increases Salary Thresholds for Overtime Exemptions

Currently, the FLSA exempts employers from having to provide overtime premium payments to executive, administrative, and professional employees who meet certain criteria, including being paid on a salaried basis at or above at least $684 per week ($35,568 annually). Starting July 1, 2024, those employees must now earn at least $844 per week ($43,888 annually) to satisfy the minimum salary requirements for an overtime exemption. Under the new rule, that salary threshold will increase again on January 1, 2025, to require that salaries be at least $1,128 per week ($58,656 annually) for the overtime exemption.

The final rule will also increase the compensation threshold for the “highly compensated employees” overtime exemption, which is currently set at $107,432 per year. Starting July 1, 2024, to be considered a highly compensated employee for purposes of the overtime exemption, employees must earn at least $132,964 annually. That compensation threshold will increase again on January 1, 2025, to require that the employee earn at least $151,164 annually.

The new rule also provides that, as of July 1, 2027, and every three years thereafter, the salary thresholds will be updated to reflect then-current earnings data.

In addition to satisfying these heightened salary requirements, exempt employees also must satisfy the “job duties” tests to be eligible for FLSA exemptions. Those tests are unchanged by the new rule.

Employers should begin to assess their current exempt employee pay structures to evaluate whether changes will be required, assuming the rule takes effect as scheduled.