Certain Salary Thresholds for Overtime Exemptions to Increase July 1

The Department of Labor issued its long-awaited final rule defining and delimiting exemptions for executive, administrative, professional, outside sales, and computer employees on April 23, 2024. 

Most notably, the final rule sets compensation thresholds for determining exemption status under the Fair Labor Standards Act (FLSA). The salary minimums for full-time salaried workers and for highly compensated workers are increasing in a phased approach, with the initial increase occurring on July 1, 2024.

Under the final rule, the new salary thresholds will increase as follows:

Standard Salary Level:

• July 1, 2024: $43,888 annually ($844 per week)
• Jan. 1, 2025: $58,656 annually ($1,128 per week)  

Highly Compensated Employees:

• July 1, 2024: $132,964
• Jan. 1, 2025: $151,164

Employees making less than the standard salary threshold, as well as employees who do not qualify as a highly compensated employee, will be eligible to receive overtime pay for hours worked in excess of 40 in a workweek. Both the standard salary level and the highly compensated salary level will be updated every three years, with the first update on July 1, 2027.

Previously, the standard salary level was $35,568 per year ($684 per week), and the highly compensated salary level was $107,432 per year. DOL estimates that 1 million employees will be impacted by the July 1, 2024, standard salary increase to $844 per week, and that 3 million employees will be impacted by the additional salary increase scheduled to take place in January 2025.

The final rule does not make substantive changes to provisions related to the salary basis or job duties tests.

Although legal challenges are anticipated based on the public’s response to DOL’s prior attempts at salary threshold rulemaking, employers should begin evaluating impacted positions now in light of the July 1, 2024, effective date. 

Contact Molly McDiarmid or any member of Phelps’ Labor and Employment team if you have questions or need compliance advice and guidance.