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On April 23, 2024, the Department of Labor (DOL) made a groundbreaking announcement that’s set to shake up the way millions of employees are classified under the Fair Labor Standards Act (FLSA). The final version of the rule mandates a significant increase in the annual salary threshold required for exempt status—a move that could affect countless workers across various industries.
While the rule maintains the existing job duties test for administrative, executive, and professional employees, it introduces a phased approach to raising the minimum salary requirement. Currently standing at $684 per week ($35,568 per year), this threshold will jump to $844 per week ($43,888 per year) effective July 1, 2024. Subsequently, on January 1, 2025, it will climb to $1,128 per week ($58,656 per year), with recalculations scheduled every three years thereafter, starting July 1, 2027.
The DOL estimates that approximately 1 million employees will feel the impact of the initial salary update, with another 3 million affected by the subsequent increase. To maintain exempt status, employers must either raise salaries or reclassify employees as non-exempt, ensuring they receive overtime pay for hours worked beyond 40 per week.
Employers are urged to scrutinize the compensation of exempt employees earning below the new thresholds. Considerations include whether overtime costs will surge, if transitioning to hourly pay is viable, or if alternative classifications, like salaried non-exempt status, are more suitable. Analysis should also assess the impact on employees’ compensation, labor costs, and administrative burden.
Beyond raising salary thresholds for white-collar workers, the final rule introduces tiered updates to the total annual compensation requirement for “highly compensated employees.” Currently set at $107,432, this figure will increase to $132,964 on July 1, 2024, and $151,164 on January 1, 2025. Given past legal challenges to similar rules, it’s expected that the DOL’s 2024 rule will face scrutiny and potential litigation.
For employees affected by these changes, understanding your rights and legal options is paramount. If you believe your employer is not complying with the new regulations or if you’re facing issues related to classification or overtime pay, don’t hesitate to seek legal guidance. Contact Kennedy Law Firm today for a free case review.