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DOL Issues Final Rule Raising Salary Threshold for Exempt “White Collar” Employees
After a lengthy comment period, the U.S. Department of Labor (DOL) issued its final rule on April 23, 2024, and raised the salary threshold for “white collar” employees to be exempt from federal overtime requirements under the Fair Labor Standards Act (FLSA). The new rule significantly increases the minimum salary requirement for executive, professional, and administrative employees, effective July 1, 2024. In other words, once the new rule goes into effect, an employer will have to pay such employees a significantly higher minimum weekly salary in order to legally classify them as exempt from overtime under the FLSA.
Currently, to be exempt from federal overtime requirements under the FLSA, a white-collar worker must receive a guaranteed base salary of at least $684 per week ($35,568 per year), in addition to satisfying the applicable “duties” test. The newly propagated rule increases this minimum salary threshold, initially to $844 per week ($43,888 per year) as of July 1, 2024, and then to $1,128 per week ($58,656 per year) as of January 1, 2025. Thereafter, the rule provides for an automatic update to the threshold every three years levered to statistical wage data.
The rule also raises the annualized salary threshold for white-collar workers to qualify under the “highly compensated employee” overtime exemption. As of July 1, 2024, this threshold would increase from $107,432 to $132,964, then on January 1, 2025, it would increase to $151,164, and thereafter the threshold would be updated every three years based on wage data.
The new rule does not modify the duties test for either the white-collar or highly compensated employee exemption, which also must be satisfied for an employee to properly be classified as exempt from federal overtime pay requirements. Likewise, the new rule does not impact employees subject to other overtime exemptions, for which the salary-basis test is not an element of the exemption (e.g. truck drivers or seasonal employees).
Click FINAL RULE to read the rule in its entirety. Click summary chart to see a chart of the applicable dates and thresholds.
DOL Issues Final Overtime Rule, Expanding Overtime Pay for Over 4 Million Workers; New Rule to Go Into Effect Dec. 1, 2016
The United States Department of Labor (DOL) Announced its long-awaited final rule regarding the update to the existing overtime rules. The new rule is set to take effect on December 1, 2016.
Most significantly, whereas the previous rule employees who met certain duties tests under the so-called “white collar” exemptions had to make at least $455 per week on a “salary basis,” the new rule brings that threshold to $913 per week (or $47,476 annually). This is approximately $3,000 less on an annual basis that an estimated $50,440 per year that a proposed version of the rule promulgated by the DOL had set last year, but over two times the current threshold amount.
The new salary basis threshold equates with the 40th percentile of weekly earnings for a full-time, salaried work in the United States’ lowest income region.
The final rule also raises the overtime eligibility threshold for highly compensated employees from $100,000 to $134,000.
While the rule raises the applicable thresholds for various exemptions, it also allows employers to count earnings paid to employees as bonuses and commissions toward meeting the salary threshold. Specifically, the rule permits employers to meet up to ten (10%) of the salary threshold with amounts paid to employees as bonus and commission payments.
Although the DOL had also asked for input on a proposed rule which would have tracked the California white collar exemptions and created a more bright-line test requiring that a worker spend at least 50 percent of his or her time on exempt duties each week to qualify for an exemption, the final rule abandoned any such change to the duties’ portions of the executive, administrative, professional, outside sales, and computer employee exemptions.
In a lesser publicized 2nd final rule, the DOL carved out certain employers from the new rule. Specifically, the 2nd rule announced a non-enforcement policy with regard to the 1st rule, for providers of Medicaid-funded services for individuals with intellectual or developmental disabilities in residential homes and facilities (i.e. group homes) with 15 or fewer beds. Under the 2nd final rule announced, from December 1, 2016 to March 17, 2019, the DOL will not enforce the updated salary threshold of $913 per week for this subset of employers covered by the non-enforcement policy.
For further information on all things pertaining to the new rules, visit the DOL’s website.
Overtime Law Blog 