DOL’s New Rule Increases Salary Threshold for FLSA Overtime Exemption Eligibility

The United States Department of Labor (“DOL”) released a final rule on April 23, 2024, significantly raising the minimum salary threshold for various exemptions under the Fair Labor Standards Act (“FLSA”).

Beginning July 1, 2024, the rule, Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees, increases the minimum weekly salary to qualify for the FLSA’s white-collar exemption (otherwise known as “EAP exemption”) to minimum wage and overtime requirements from $684 per week to $844 per week. By January 1, 2025, the rule again raises the salary threshold to $1,128 per week.

Practically, this means that white-collar employees—described as executive, administrative, or professional employees—making less than the threshold defined by the DOL will be excluded from the white-collar exemption and, thus, will be entitled to overtime pay.

Further, the rule increases the earnings threshold for the FLSA’s highly compensated employee exemption (“HCE exemption”) from $107,432 per year to $132,964 per year. This will take effect July 1, 2024. On January 1, 2025, the annual salary threshold for the HCE exemption increases to $151,164. Again, this means that employees earning less than the annual salary threshold will be subject to the FLSA’s minimum wage and overtime regulations.

Finally, the rule provides for increases every three years to the salary thresholds for both the white-collar exemption and the HCE exemption to take place July 1. Thus, the first salary threshold increase after the 2024 and 2025 increases will take place July 1, 2027.

While it is possible that court challenges could block the rule, in the meantime, employers must prepare for the changes. Employers should review their workforce to identify employees who are currently exempt from the FLSA’s minimum wage and overtime requirements and put a plan in place to comply with the increases to the salary thresholds on July 1, 2024, and January 1, 2025.

Employers should contact their Thompson Coburn attorney to determine how this affects their company.