DOL Finalizes Increase to Salary Threshold for FLSA

The U.S. Department of Labor (DOL) unveiled a new final rule that will significantly raise the minimum salary threshold to qualify for certain overtime exemptions under the Fair Labor Standards Act (FLSA), changing which employees will be entitled to overtime pay and affecting employer compensation structures.

The new DOL final rule will make key changes to the FLSA exemptions:

1. Increase the minimum weekly salary from $684 per week ($35,568 annually) to $844 per week, equivalent to $43,888 per year, on July 1, 2024. That threshold is then set to increase on January 1, 2025 to $1,128 per week, equivalent to $58,656 per year, which is tied to the 35th?percentile of salary in the lowest-wage Census Region.
2. Increase the HCE exemption total annual compensation to $132,964 per year on July 1, 2024. That threshold will then increase on January 1, 2025 to $151,164, equivalent to the 85th?percentile of full-time salaried workers nationally.
3. Provides for future updates to the earnings thresholds every three years based on up-to-date wage data.

The new final rule will most likely face legal challenges as did the earlier 2016 rule that attempted to raise the exemption threshold, which could delay implementation. If the final rule withstands legal challenges, then employers may want to consider adjusting compensation structures for exempt employees earning more than $35,568 per year but less than the new exemption minimum of $58,656. Otherwise, employers may want to consider reclassifying such employees.

Note: If you enjoyed this article, check out my award-winning and bestselling HR book Pay Matters: The Art and Science of Employee Compensation.

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