Alert – DOL Increases Overtime Exemptions’ Salary Thresholds

Today, the U.S. Department of Labor announced the amendment of its regulations to significantly change the salary thresholds for the “white-collar” overtime exemptions. As you know, to properly classify certain employees as exempt from overtime under the Fair Labor Standards Act (FLSA), an employer must be able to meet a duties test and a salary test. 

As we previously discussed, the DOL has not changed the duties tests for executive, administrative, and professional employees – the “white-collar” exemptions. Although it has only changed the salary tests, the new thresholds will have a big impact on employers. 

Under the current regulations, an executive, administrative, or professional employee generally must be paid at least $684 per week ($35,568 annually) to be exempt from overtime. Under the newly amended regulations, an employee must be earning at least $1,128 per week ($58,656 annually) to be classified as exempt from overtime. This change becomes effective in two stages: on July 1, 2024, the salary threshold will change to $844 per week ($43,888 annually), and on January 1, 2025, it will change to $1,128 per week ($58,656 annually). 

For highly compensated individuals, the salary threshold is changing from the current standard of at least $107,432 annually to the new threshold of $132,964 annually on July 1, 2024 and to $151,164 annually on January 1, 2025. 

The amended regulations also provide for future updates to the salary thresholds every three years to reflect current earnings data.

Employers should use the next few months to evaluate their exempt employees and determine whether some need to be converted to hourly employees. As always, KZA attorneys are available to assist you with this analysis and process.

KZA Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.