The U.S. Department of Labor’s final rule on overtime exemptions, announced on April 23, 2024, is set to bring significant changes to the salary thresholds for exempt employees starting July 1, 2024, with further increases planned for 2025. This rule aims to extend overtime protections to millions of workers and update the regulations under the Fair Labor Standards Act (FLSA).
Key Changes
On July 1, 2024, the minimum salary threshold for executive, administrative, and professional employees to be classified as exempt from overtime rose to $844 per week or $43,888 annually. This marks a substantial increase from the previous threshold of $684 per week or $35,568 annually. As currently planned, an even more significant change is scheduled for January 1, 2025, when the salary threshold will further increase to $1,128 per week or $58,656 annually. Similarly, the highly compensated employee exemption increased to $132,964 on July 1, 2024, and is set to increase again to $151,164 on January 1, 2025.
Impact and Considerations
Assuming they take effect as scheduled, employers must carefully evaluate their workforce to identify roles that may be affected by the new thresholds. Some key considerations include:
- Reclassification: Employers may need to reclassify some exempt employees as non-exempt if their salaries fall below the new thresholds.
- Salary Adjustments: For employees near the threshold, companies might consider raising salaries to maintain exempt status.
- Compliance Costs: Businesses should anticipate increased labor costs, either through higher salaries or potential overtime payments.
- State Laws: Employers must also be aware of state-specific overtime laws, which may have higher thresholds or different requirements
Like all Agency regulations, final implementation may be challenged or delayed by court challenges or politics. As we near the implementation of the 2025 date, Employers should monitor U.S. Department of Labor updates to track the status of this pending change.