DOL announces Final Rule on overtime exemption salary thresholds

By Adams and Reese, LLP.

Employers should proactively begin evaluating whether to reclassify workers as non-exempt and begin paying overtime or to increase salaries above the potential minimum.

Under a Final Rule announced April 23, 2024, the salary threshold for "white collar" exemptions (executive, administrative and professional) will increase effective July 1, 2024, to the equivalent of an annual salary of $43,888. On January 1, 2025, the threshold will rise to the equivalent of a $58,656 annual salary.

In this Final Rule, the DOL used the methodology underlying the 2019 overtime salary level rule update.

Also effective on July 1, 2024, the “highly compensated employee” exemption will require payment of a minimum $132,964 total annual compensation to the worker. Moreover, starting on July 1, 2027, the minimum salary thresholds will begin automatically updating every three years, setting new salary levels based on up-to-date wage data.

The final rule may draw legal challenges like those lodged against the DOL’s 2016 unsuccessful attempt to raise the salary minimum to $921 per week.

Now that the DOL has announced the final salary levels and effective start dates, employers should proactively begin evaluating whether to reclassify workers as non-exempt and begin paying overtime or to increase salaries above the potential minimum.

The DOL regulatory action also provides a good opportunity for employers to assess whether employees currently classified as exempt are also satisfying the “duties” tests required for the exemptions. Employers also should carefully review whether salary increases to preserve overtime exemptions might lead to claims of discrimination from employees who do not receive pay raises.

Note: This article updates an alert that Adams and Reese wrote in September 2023 - "Potential Significant Increases in Salary Minimums for 'White Collar' Overtime Exemptions are on the Horizon."