Final Rule for White Collar Exemption Threshold

Yesterday, the U.S. Department of Labor (“DOL”) issued its long awaited final rule increasing the requisite salary level for the “white collar” executive, administrative, and professional exemptions from the federal Fair Labor Standards Act’s (“FLSA”) overtime rules.  The DOL estimates that this rule will make roughly 4 million more workers eligible for overtime pay.  The new rule currently is scheduled to take effect on July 1, 2024, and it can be found here.

The FLSA’s white collar exemptions apply if an employee performs certain duties and earns at least a set minimum guaranteed salary.  Currently, the salary requirement is $684 per week ($35,568 per year).  Under the new rule, the salary basis requirement will increase in two stages.  First, on July 1, 2024, it will increase to $844 per week ($43,888 per year).  On January 1, 2025, it will increase again to $1,128 per week ($58,656 per year.  Thereafter, automatic updates will occur every three years. 

The new rule also changes the threshold for “highly compensated employees,” who are subject to a more relaxed duties test in evaluating their exempt status. Currently, the highly compensated threshold is $107,432 per year.  Like the regular salary test, this threshold will also increase in stages under the new rule.  On July 1, 2024, it will increase to $132,964 per year.  On January 1, 2025, it will increase to $151,164 per year. This threshold will also be updated every three years.

As in the past, the new rule is subject to legal challenges, which employers should monitor closely.  In the meantime, employers should review their salaries and exempt classifications to prepare for potential changes.  If you have any questions about the proposed rule or how to prepare for it, please contact one of Honigman’s Labor and Employment attorneys.