Scroll to top

DOL Final Rule on FLSA Wage Rules

Recently, the U.S. Department of Labor published its final rule to increase the minimum salary necessary to qualify for exemption from the Fair Labor Standards Act’s (“FLSA”) minimum wage and overtime requirements applicable to employees who are classified exempt under the executive, administrative, or professional exemptions. 

The final rule deviates from the proposed rule’s cold turkey doubling of the minimum salary threshold to instead phasing in the new minimum salary threshold increase over a two-year period. The first increase to the threshold takes effect on July 1, 2024, and requires that employees classified exempt under the executive, administrative, or professional exemption to the FLSA be paid at least $844 per week ($43,888 per year) on a salary basis in order to remain exempt (assuming the employee otherwise satisfies the applicable “duties test” of the exemption, which remains unchanged). The second increase to the threshold takes effect on July 1, 2025, and requires that employees classified exempt be paid at least $1,128 per week ($58,656 per year) on a salary basis in order to remain exempt (again, subject to also satisfying the “duties test” of an applicable exemption). 

If the final rule remains in effect for the July 1, 2025 increase, it will mark an increase that nearly doubles the current minimum salary threshold of $684 per week. While we typically see some degree of moderation from DOL between its proposed rule and final rule, here, the only moderation was the phased-in approach. An increase in the salary threshold to $684 per week is exactly what DOL projected in its proposed rule, published last year.

After the July 1, 2025 increase, the minimum salary will be scheduled to increase automatically every three years based on an annualized statistical determination from the federal Bureau of Labor Statistics.

We note that this final rule increases the federal minimum salary, only, and that some state wage and hour laws may still require a higher minimum salary to qualify for exemption from minimum wage and overtime requirements.

Although the Biden administration projects the final rule “expands overtime protections for millions of the nation’s lower-paid salaried workers,” we have seen these rule changes play out time and time again, resulting in most employers enacting budget neutral solutions to comply with the new rules. This political hot potato will be familiar to HR departments everywhere, including those caught implementing the Obama DOL’s new minimum salary only to find out after the fact that a federal court had enjoined the implementation of the new rule, nationwide, a trend that seems likely for the FTC rule we informed you about earlier today, and may very well apply to this rule, too. 

For this reason, we encourage our friends and clients to meet with the necessary departments and internal constituencies to have a compliance plan ready to go when the new rule is scheduled to take effect on July 1, 2024, but ultimately recommend holding the implementation of that rule until after the effective date in order to remain flexible in the event of another judicial intervention. After all, under federal law and most state laws, you will have until the next pay date after July 1 to implement changes without altering your normal payroll processes and may (under federal and some state laws) have until as late as July 31, 2024. 

Delaying any communication or announcement of your compliance plan until after the rule is scheduled to take effect but no later than applicable law requires issuing a paycheck, will give you time to assess the implications of any judicial intervention.

 

Related posts

Post a Comment