On April 23, 2024, the U.S. Department of Labor released its final rule, making millions of salaried workers nationwide overtime eligible by increasing the salary threshold required to classify an employee as exempt from overtime as a bona fide executive, administrative or professional employee.

The rule addresses the carveout for such exempt employees from the overtime requirements under the Fair Labor Standards Act. Generally, employers are required to pay their workers an hourly wage and overtime pay of at least 1.5 times the employee’s regular rate of pay for hours worked in excess of 40 in a work week. Employees with certain duties and whose salaries exceed a given threshold are exempt from the FLSA’s overtime requirements.

Effective July 1, 2024, the salary threshold will increase from an equivalent of an annual salary of $35,568 to $43,888. On Jan. 1, 2025, the threshold will further increase to $58,656.

The rule will also adjust the overtime salary threshold for an additional category of exempt employees, the highly compensated employee. Effective July 1, 2024, the salary threshold for highly compensated employees will increase from $107,432 to $132,964. On Jan. 1, 2025, the threshold will increase again to $151,164.

Additionally, under the rule the salary thresholds will be updated every three years by applying up-to-date wage data to determine new salary levels.

Given the new salary thresholds, employers should reassess their classification of employees as exempt and their pay practices to ensure they remain in compliance with the FLSA upon enactment of the increased salary thresholds for exempt employees. As a reminder, many states have stricter laws regarding exemptions from overtime. Employers in such states should ensure compliance with those laws as the DOL’s final rule does not preempt them. 

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If you have questions or would like additional information, please contact our Labor & Employment attorneys or the primary EGS attorney with whom you work.