The US Department of Labor (DOL) last week announced a final rule governing the Fair Labor Standards Act (FLSA) increasing the minimum salary level for overtime exemptions.

Employers need to hold onto their hats with this fast-moving initiative, which will take effect on July 1.  That is because the salary threshold is going to go up twice in the next eight months. There is extensive information on the DOL website.

• Step 1. The salary threshold will increase from its current rate of $684 per week ($35,568 per annum) to $844 per week ($43,888 per annum) on July 1.
• Step 2. The salary threshold will increase from $844 a week to $1,128 per week ($58,656 per annum) on Jan. 1, 2025.
• Step 3. On Jan. 1, 2025, the rule’s new methodology takes effect, resulting in additional cost-of-living based increases that will take effect every three years on July 1. The first increase is projected to take effect on July 1, 2027, when up-to-date wage data will be used to determine new salary levels. The regulations do provide for the DOL to waive the increase under certain circumstances.
• Exempt status for highly compensated employees, who are exempt from the overtime requirement even if their positions do not meet the FLSA’s duties test, will be subject to the same two-step process beginning July 1 when the rate moves from its current $107,432 up to $132,964. It will then increase to $151,164 on January 1, 2025.

The new rule does not change the duties test for exempt classifications (i.e., Executive, Administrative, and Professional – the so-called EAP exemptions). But employers need to go back and look at their existing salary structure to make sure that all of their exempt employees meet the new salary threshold.

Read the final rule.

It is a near certainty that the new rule will be challenged in court, but at this point it is hard to predict whether the litigation will result in a delay in implementation

AIM will provide an FLSA-related seminar on May 2, so please join us as we discuss how the new rule will impact your business and what you can do to prepare for it. The session will provide a detailed discussion of FLSA and employee-classification issues.

AIM members with questions about this or any other human resources matter may contact the AIM helpline at 1-800-470-6277