DOL Raises Minimum Salary Thresholds for Overtime Exemptions
06/14/2024The DOL recently issued a new rule significantly raising the minimum salary thresholds for employees covered by certain overtime exemptions. The minimum salary thresholds will increase annually starting July 1, 2024 for three years and then automatically increase every three years thereafter.
This DOL rule affects employees who are exempt under the executive, administrative, professional, computer and highly compensated employee overtime exemptions. For an exemption to apply the employee must meet the salary threshold and the job duties described in the exemption.
The currently salary threshold for executive, administrative, professional, and computer employees is at least $684/week. Highly compensated employees must be paid a total annual compensation of at least $107,432 of which at least $684/week must be paid on a salary or fee basis. Note that some states such as Colorado, California, New York and Washington have higher minimum compensation thresholds.
The new minimum salary thresholds effective July 1, 2024 are:
• $844/week (which annualizes to $43,888 per year) for executive, administrative, professional, and computer employees
• $132,964 annual compensation for highly compensated employees of which $844/week must be paid on a salary or fee basis
On July 1, 2025, the minimum salary thresholds will be:
• $1,128/week (which annualizes to $58,656 per year) for executive, administrative, professional, and computer employees
• $151,164 annual compensation for highly compensated employees of which $1,128/week must be paid on a salary or fee basis
The DOL rule has been challenged in court, which may invalidate the increases or delay implementation. However, given the quickly approaching deadline, we recommend that employers plan to implement the changes but wait to make the changes until the deadline gets closer. We recommend that employers audit exempt employee salaries to determine whether any currently exempt employees will lose their overtime exemption under the new rule. Depending on the outcome of the audit, employers will either need to plan to raise salaries paid to exempt employees earning salaries below the minimum threshold to maintain their overtime exemption or reclassify these employees as non-exempt and pay overtime if overtime hours are worked. This is also an opportunity to review exempt positions to make sure employees meet the job duties test to qualify for the overtime exemption.
Please contact us if you have any questions about the new rule.