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DOL releases final rule increasing salary threshold for overtime eligibility

4/24/24

By: Sunshine R. Fellows

On Tuesday, April 23, 2024, the U.S. Department of Labor issued its long-anticipated final rule raising the salary thresholds for overtime exemptions. The final rule, which could take effect this summer, will significantly increase the salary threshold for overtime exemptions under the Fair Labor Standards Act.

With limited exceptions, the rule increases the minimum salary for overtime exemption for white collar workers, including executive, administrative, and professional employees, in two stages. The threshold will increase to the equivalent of an annual salary of $43,888, or $844 per week, starting July 1^st, and then to $58,656, or $1,128 per week, on January 1, 2025. 

The current threshold is $35,568 a year, or $684 per week, which was put in place by the Trump administration in 2019. The Department estimates that roughly four million more workers will qualify for overtime when the rule is fully implemented in January.

The final rule also increases the total annual compensation requirement for highly compensated employees from $107,432 per year to $132,964 per year effective July 1, 2024. Effective January 1, 2025, the total annual compensation requirement for highly compensated employees will increase to $151,164. Additionally, the rule will require automatic increases to these thresholds every three years.

The regulation is almost certain to face significant legal challenges. Business groups are expected to challenge the rule, as they successfully did when the Obama administration attempted to increase the salary threshold in 2016, culminating in a federal judge in Texas issuing an injunction. 

Anticipated legal challenges will take time with uncertain outcomes, so employers should be prepared to implement changes effective July 1, 2024. Specifically, employers should review their exempt positions to identify which jobs will be impacted by the increased salary threshold. Employers should be prepared to decide whether to raise the salaries for impacted workers to keep affected positions exempt, or to re-classify the affected positions as non-exempt.

For more information, please contact your local FMG attorney.