Patrick J. Barrett
402.978.5245pbarrett@fraserstryker.com email Patrick
The revisions provide for increasing the minimum salary level for the administrative, executive, and professional exemptions and the total annual compensation threshold for the highly compensated employee (“HCE”) exemption, as well as regular updating of the salary and compensation thresholds in the future.
Presently, in order for employees to be exempt under the “white collar” exemptions, they must be paid a salary of at least $684 per week ($35,568 annually) without counting nondiscretionary bonuses and incentive payments. For the “white collar” exemptions, the threshold will increase to $844 per week ($43,888 annually) on July 1, 2024. On January 1, 2025, the threshold will increase to $1,128 per week ($58,656 annually). Employees who receive salaries less than these amounts will no longer qualify for the “white collar” exemptions and, therefore, will be owed overtime compensation of time and a half the regular rate of pay for any hours worked in excess of 40 hours per work week. For highly compensated employees, the annual compensation threshold will increase to $132,964 per year on July 1, 2024. On January 1, 2025, the threshold will increase further to $151,164 per year.
The Final Rule also implements automatic updates to the salary thresholds every 3 years. The DOL will determine the new salary threshold by applying then-current earnings data using the same methodology it used in setting the current increases. This means that minimum salary requirements will likely increase routinely without the DOL conducting formal notice-and-comment rulemaking. Automatic updates to the minimum salaries could, however, be delayed if unforeseen economic or other conditions warrant.
The Rule does not change the duties portion of the exemptions. Employees must continue to meet all of the other requirements of the applicable FLSA exemption in order for the exemption to apply.
The DOL expects that the new minimum salary increases will cause 4 million workers to be potentially misclassified as exempt from overtime unless the employer increases their pay to meet the new requirements or reclassifies them as non-exempt.
Employers should reassess the current exemption status of their workers to ensure that those presently classified as exempt will still qualify as exempt under the new criteria. This is also an opportune time to review employees’ job duties and exemption status to ensure employees are properly classified and paid.
If you have questions regarding this or other labor and employment-related legal issues, reach out to our Labor and Employment Law team for assistance.
This article has been prepared for general information purposes and (1) does not create or constitute an attorney-client relationship, (2) is not intended as a solicitation, (3) is not intended to convey or constitute legal advice, and (4) is not a substitute for obtaining legal advice from a qualified attorney. Always seek professional counsel prior to taking action.