Looming U.S. Department of Labor Final Rule set to Further Increase Salary Thresholds on January 1, 2025
Earlier this year, we alerted you to sweeping employment law changes resulting from the final rule issued by the U.S. Department of Labor (DOL), increasing salary thresholds for certain employees exempt from overtime requirements under the Fair Labor Standards Act (FLSA). The FLSA requires covered employers to pay employees a minimum wage, and overtime pay of at least 1.5 times the employee’s regular hourly rate for employees who work over 40 hours in a week. The FLSA exempts certain employees from its minimum wage and overtime requirements, including highly compensated employees. Provided that they meet the job duties, salary basis and salary threshold tests, executive, administrative, and professional (EAP or “white collar”) employees are exempt under the FLSA.
What are the Salary Thresholds?
On July 1, 2024, the annual salary threshold for exempt employees increased to $43,888 per year ($844 per week). The threshold for highly compensated employees increased to $132,964 per year. On January 1, 2025, the salary threshold for exempt employees will increase again to $58,656 per year ($1,128 per week) and the threshold for highly compensated employees will increase to $151,164 per year.
Multiple lawsuits have been filed seeking to overturn the final rule and request for an injunction against enforcement. On September 11, 2024, the U.S. Court of Appeals for the Fifth Circuit ruled that the DOL has the authority to impose a minimum salary level requirement to qualify for certain exemptions under the FLSA. However, the Court did not address the DOL’s final rule in their ruling.
What do Employers Need to Know?
What steps should employers take to protect their business and ensure new compliance with the new rule? While litigation is pending, the DOL rule remains in effect. Employers must continue to comply with the new salary threshold requirement and prepare for the increase on January 1, 2025. We advise auditing employees to ensure that exempt employees are correctly classified and meet all required tests including the salary threshold. Employers may need to educate employees who will be reclassified as nonexempt subject to timekeeping and overtime.
For more information about how the new rule may impact your business, contact the Davis, Agnor, Rapaport & Skalny attorney with whom you typically work, or contact and attorney in our Labor & Employment Practice Group.
