Written by Kristin Ahr, Mitch Boyarsky, Matthew T. Brown, Jeffrey Johnson and Robert O. Sheridan from Nelson Mullins Riley & Scarborough LLP on June 5, 2024
The U.S. Department of Labor (DOL) announced on April 23 a final rule, Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees, which will take effect on July 1, 2024. The Rule is facing legal challenge in Texas[1] but will go into effect if the legal action is unsuccessful or incomplete by the effective date. We previously posted an alert discussing the announcement of the DOL’s proposed rule increasing the minimum salary threshold for exempt employees here. Unlike the DOL’s proposed rule, the final rule will incrementally increase the minimum salary level for overtime exempt classification between July 1, 2024 and the beginning of 2025.
Starting July 1, 2024, the final rule will require that most salaried workers who earn less than $43,888 ($844 per week) be eligible for overtime pay. Further, under the final rule, the minimum salary for overtime exempt status will increase again to $58,656 per year ($1,128 per week) on January 1, 2025. The rule will also increase the total annual compensation requirement for the highly compensated employee exemption from $107,432 per year to $132,964 per year on July 1, 2024, and then increase again to $151,164 per year on January 1, 2025.
Further, beginning July 1, 2027, the minimum salary level for exempt status will be updated every three years to keep pace with changes in worker salaries and reflect current earnings data. As always, the increased minimum salaries remain one of several requirements for a proper exempt classification; employees must also continue to primarily perform exempt job duties as defined by the DOL’s regulations.
In light of the DOL’s final rule, employers should (1) ensure their overtime-exempt employees are paid on a salary basis at or above the minimums in the DOL’s final rule, or begin the process of reclassification in advance of July 1, 2024; and (2) continue to monitor state and local law, which often requires higher minimum salaries, and imposes more stringent requirements regarding the primary duties of exempt employees.
