Article by Camden Navarro Massingill, Wade Kolb, and Rachel Horton
On April 23, 2024, the U.S. Department of Labor (DOL) issued a final rule that significantly increases the minimum salary requirements to qualify for certain “white collar” (executive, administrative, professional, and highly compensated employee) exemptions under the Fair Labor Standards Act (FLSA). The new rule, “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees,” which phases in over two dates, will make the following three significant changes:
- Beginning July 1, 2024, the standard salary level for bona fide executive, administrative, and professional employees will increase from $684 per week (or $35,568 per year) to $844 per week (or $43,888 per year). On January 1, 2025, the salary level will rise again to $1,128 per week (or $58,656 per year).
- Beginning on July 1, 2024, the annual compensation threshold for highly compensated employees will increase from $107,432 per year, including at least $684 per week paid on a salary or fee basis, to $132,964 per year, including at least $844 per week paid on a salary or fee basis. On January 1, 2025, the compensation threshold will rise again to $151,164 per year, including at least $1,128 per week paid on a salary or fee basis.
- Beginning July 1, 2027, and every three years thereafter, the salary thresholds will automatically update, using the methodology in effect at the time of each adjustment.
If implemented, the final rule is expected to result in a substantial increase in the number of employees eligible for minimum wage and overtime protections under the FLSA. According to DOL estimates, in the first year of the final rule taking effect, approximately four million workers will be impacted. The DOL further estimates that 292,900 employees will be affected by the adjustment to the highly compensated exemption salary threshold. Employers should assess the current exemption status of their workforce to help ensure that all workers presently classified as exempt will still qualify under the new criteria.
Educational Institutions can take some comfort, however. Existing exemptions for teachers and coaches will remain in place.
Wyche is happy to answer any questions you may have regarding this rule and assist in planning for how it may affect your business. For more information, please visit the Department of Labor’s guidance website: Final Rule: Restoring and Extending Overtime Protections | U.S. Department of Labor (dol.gov).
