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The U. S. Department of Labor (“DOL”) published a final rule in April adjusting the threshold for exempt employees. The salary threshold is crucial for Fair Labor Standards Act (FLSA) classifications, determining eligibility for overtime pay for employees working more than 40 hours a week.
An employee’s duties must meet specific criteria under the duties test to be exempt. Exempt categories include Executive, Administrative, Professional, Computer, and Outside Sales roles. The DOL provides a fact sheet explaining these classifications.
Despite speculation about legal challenges, no decisions have been made as of June 18, 2024. Employers should immediately prepare to comply with the new rule, regardless of potential legal battles. This is especially important for those uncertain about current employee classifications.
In 2016, the Obama administration’s attempt to raise the weekly salary threshold from $455 to $913 was blocked by a federal judge and was not pursued further. The Trump administration later increased the threshold to $684 weekly on January 1, 2020. The Biden administration has used a similar methodology to propose this year’s increase. Unless legally challenged, the threshold will rise from $684 to $844 per week ($43,888 per year) on July 1. The highly compensated employee standard will also increase from $107,432 to $132,964 per year.
Assess employee classifications that pay between $35,568 and $43,888 per year. Depending on the role and its duties, employers may need to adjust the classification from exempt to nonexempt or increase salaries to meet the new salary threshold.
Preparing for Round Two, Effective January 1, 2025
The second round of increases takes effect January 1, 2025. The exempt salary threshold will rise to $58,656 ($1,128 per week), while the highly compensated employee threshold will increase to $151,164 per year. The regulations also provide for an adjustment every three years beginning July 1, 2027.
The DOL released the chart below explaining the changes and their effective dates:
| DATE | STANDARD SALARY LEVEL | HIGHLY COMPENSATED EMPLOYEE TOTAL ANNUAL COMPENSATION THRESHOLD |
| Before July 1, 2024 | $684 per week (equivalent to $35,568 per year) | $107,432 per year, including at least $684 per week paid on a salary or fee basis. |
| July 1, 2024 | $844 per week (equivalent to $43,888 per year) | $132,964 per year, including at least $844 per week paid on a salary or fee basis. |
| January 1, 2025 | $1,128 per week (equivalent to $58,656 per year) | $151,164 per year, including at least $1,128 per week paid on a salary or fee basis. |
| July 1, 2027, and every 3 years thereafter | To be determined by applying to available data the methodology used to set the salary level in effect at the time of the update. | To be determined by applying to available data the methodology used to set the salary level in effect at the time of the update. |
If you have questions about these changes or any other HR-related issues, contact the AIM Helpline at 800-470-6277 or email helpline@aimnet.org. For more complex HR concerns, visit AIM HR Solutions at www.AIMHRSolutions.com.
