On April 23, 2024, the Department of Labor (DOL) announced a new rule that will increase the salary threshold for executive, administrative and professional employees to be exempt from overtime payments under federal law. This means that salaried employees in these categories who earn less than the threshold will be required to be paid at the overtime rate (1.5 times the employee’s regular hourly rate) for all hours worked over 40 in a week.
Under the Fair Labor Standards Act (FLSA), executive, administrative and professional employees are those who earn a fixed salary or fee and whose job duties involve a certain level of authority and/or advanced knowledge. The current federal exemption threshold for these employees is an annual salary of $35,568 (or $684 per week). Effective July 1, 2024, this threshold will increase to $43,888/year (or $844 per week), and on January 1, 2025, it will increase again to $58,656/year (or $1,128 per week).
Additionally, the overtime exemption threshold for highly-compensated employees will increase to $132,964/year effective July 1, 2024 and $151,164/year effective January 1, 2025. The current threshold is $107,432/year.
The DOL will update these exemption thresholds every three years starting July 1, 2027.
Employers should review their exempt employees’ salaries and job responsibilities to determine if employees will be affected by this change. Currently exempt employees who earn less than the new thresholds may need to be reclassified as non-exempt (and thus become eligible for overtime payments for all hours worked over 40 per week) or have their salaries increased to meet the new threshold.