News: DOL Releases OT Final Rule Significantly Raises Wage Threshold for Exemptions | Bakerhosteler

Key Takeaways

  • Yesterday, the US DOL finally announced its long-awaited final rule amending the FLSA to increase the FLSA wage thresholds for overtime exemptions.
  • The increase is significant and will take effect on July 1, with additional increases scheduled for January 1, 2025, and future updates scheduled every three years to reflect then-current earnings data.
  • This will undoubtedly affect the exempt classification of many employees, so employers should be sure to review the wages of their exempt employees to ensure proper classification.

Yesterday (April 23, 2024), the US Department of Labor (DOL) finally announced its long-awaited final rule, Definitions and Limits of Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees, which amends the regulations under 29 CFR part 541 of the Fair Labor Standards Act (FLSA) and increases the FLSA wage thresholds for overtime exemptions.

The increase is significant and will take effect on July 1, leaving employers with little time to comply. Additional increases are scheduled for January 1, 2025, with future updates scheduled every three years to reflect current earnings data.

In general, the final rule makes the following changes:

  • It increases the pay threshold for executive, administrative and professional employees and the total annual compensation requirement for highly compensated employees (HCEs).
    • On July 1, the salary cap will be $844 per week (or $43,888 per year) and the HCE total annual compensation requirement will be $132,964.
    • On January 1, 2025, the salary cap will be $1,128 per week (or $58,656 per year) and the HCE total annual compensation requirement will be $151,164.
  • It adopts a mechanism to automatically update profit margins every three years.

Although some states already have higher wage thresholds for exempt employee status, many states simply follow the FLSA requirements, which will cause many employers to try to raise the wages of exempt employees or reclassify exempt employees as non-exempt.

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