Perspectives

DOL Raises Salary Compensation Threshold-What it Means for Employers?

On April 23, 2024, the U.S Department of Labor (DOL) issued a Final Rule raising the minimum salary thresholds for exempt employees under the Fair Labor Standards Act (FLSA). Exempt employees are (quite literally) exempt from the minimum wage, overtime, and time reporting provisions of the FLSA, allowing employers to pay these employees a weekly salary regardless of actual hours worked. The DOL sets the minimum threshold for compensation, and the positions must meet certain duties tests to be considered exempt. The Final Rule affects employees under the White Collar Exemption (executive, administrative, or professional) and Highly Compensated Employees’ Exemption.

Now and until July 1, 2024, employees occupying white collar exempt positions must be compensated at a rate of at least $684 per week ( about $35,568 per year). Similarly, employees in highly compensated positions must be compensated at a rate of at least $107,432 to qualify for the exemption.

The DOL, in its Final Rule, drastically raised these thresholds. But, potentially to soften the blow on the employers, the DOL is implementing the salary threshold increase in a two-part approach:

• First, effective on July 1, 2024, the salary level threshold for exempt employees will increase to a minimum of $844 per week (about $43,888 per year), and to $132, 964 per year for highly compensated employees.
• Then, starting on January 1, 2025, the threshold is set to increase to at least $1,128 per week (about $58,656 per year) for exempt employees and $151, 164 per year for highly compensated employees.

The Department of Labor plans on updating salary thresholds every three years beginning July, 1, 2027.

What Should Employers Do Now?

The Final Rule has already not been well received by some, and is expected to be challenged-which could delay implementation. Nevertheless, employers should proceed with caution and, despite the potential delay in the implementation, start preparing and budgeting for the changes.

• Employers could either prepare to increase employees’ salaries in a two-part approach, as the DOL suggests, first on July 1, 2024, and then again on January 1, 2025.
• Employers could also increase the salary threshold to January 1, 2025 levels on July 1, 2024.
• Employers can always convert the employees to the nonexempt status should the new thresholds be too burdensome.

As always, when it comes to exempt employees’ classification and compensation, employers should always seek experienced legal counsel. Our attorneys at Wagner, Falconer & Judd are always available to answer any of your questions.