On April 23, 2024, the U.S. Department of Labor published a final rule raising the minimum weekly salary many exempt employees must be paid to qualify as exempt from overtime under the Fair Labor Standards Act.  The new rule raises the salary basis threshold for executive, administrative, professional and computer professional exempt employees from $684 per week ($35,568 per year) to $844 per week ($43,888 per year) beginning July 1, 2024.

Thereafter the minimum salary increases to $1,128 per week ($58,656 per year) on January 1, 2025.  Computer professionals may still be paid on an hourly basis at a rate of not less than $27.63 per hour, and professional and administrative employees may also be paid on a fee basis.

Highly compensated exempt employee salary thresholds are raised from $107,432 to $132,964 per year on July 1, 2024, and $151,164 per year on January 1, 2025.

The shortest increment of time over which an exempt employee can be paid a salary basis is one week although longer periods of time are permitted so long as the salary equates to at least the minimum weekly salary set by the rule.  This precludes the ability that an employee paid on a day rate to meet the requirement that the employee is paid on salary basis and therefore would not qualify as exempt.

Furthermore, the rule provides for automatic salary threshold increases once every 3 years starting in 2027 as determined by the Secretary of Labor.

The new rule is likely to be challenged in Court.  In 2016 when the Department made proposed changes to the salary basis thresholds, the implementation of the rule was blocked by court action and implementation was delayed and the salary threshold later lowered.  Some employers communicated or implemented changes in anticipation of the effective date of the rule increasing exempt employee salaries or converting employees to nonexempt.  When the rule’s effective date was delayed by the court and the salary that was finally implemented was less than initially proposed, employers were faced with challenging decisions about whether or how to roll back the changes.  Thus, employers may want to formulate their plans to comply with the new rule but delay communication and implementation of the plans to see if and when the rule becomes effective.

Steps Employer Should Take

  1. Audit all employees classified as exempt under the executive, administrative, professional, computer professional and highly compensated employee exemptions and determine whether the employees are paid on a salary basis at least as high as the new salary basis thresholds.
  2. For any employee who has a salary falling below new salary basis threshold, determine whether it is better for the employer to raise the employee’s salary to the new minimum or convert the employee to non-exempt, maintain accurate records of the employee’s working time and paying overtime.
  3. Set calendar reminders in advance on the dates that the minimum salary basis threshold is scheduled to increase and plan to make appropriate changes to exempt employee salaries to remain exempt or convert to nonexempt.

The Final Rule is accessible here.

The full commentary and text of the Final Rule is accessible here.