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On April 23, 2024, the US Department of Labor (DOL) released a final rule updating the Fair Labor Standards Act’s (FLSA) overtime pay requirements. This rule introduces significant changes to the salary thresholds for exempt employees, also known as “white collar” workers, and highly compensated employees (HCE).

Key Changes Effective July 1, 2024, and January 1, 2025

1. White Collar Exemption Salary Thresholds:
   • Effective July 1, 2024, the minimum salary threshold for white collar exemptions will increase to $844 per week, or about $43,888 per year.
   • On January 1, 2025, this threshold will further increase to $1,128 per week, or about $58,656 per year.
2. Highly Compensated Employee (HCE) Exemption:
   • The new rule also increases the salary requirements for the HCE exemption, although the specific new thresholds for HCE were not detailed in the final rule information.

Understanding White Collar and Highly Compensated Exemptions

• White Collar Exemption:
  • Employees must receive a salary equal to or greater than the DOL-set threshold (currently $684 per week) and primarily perform executive, administrative, or professional duties as defined by the DOL.
• Highly Compensated Employee Exemption:
  • Employees must be paid total annual compensation in excess of the set salary threshold (currently $107,432), which includes at least the minimum weekly basis of the white collar exemption.
  • They must have a primary duty that includes performing office or non-manual work and customarily and regularly perform at least one of the exempt duties or responsibilities outlined in the white collar exemption.

Methodological Changes and Future Updates

The Final Rule introduces a new methodology for calculating and periodically updating salary thresholds to reflect current earnings data. This approach incorporates US Census salary data and mandates that these thresholds be automatically adjusted every three years. This change ensures that the thresholds remain aligned with economic trends and eliminates the need for formal rulemaking to increase thresholds, as was the case previously.

Conclusion

The new rule marks a substantial update to the FLSA’s overtime pay requirements, ensuring that salary thresholds for exempt employees keep pace with earnings growth. Employers should prepare for these changes and adjust their payroll practices accordingly to comply with the new requirements.

For further questions, contact Julia with JR Business Solutions at 320-979-7116.