Employers Take Note: Department of Labor Increases Overtime Exemption Threshold for Employees, Starting July 1

Starting on July 1, 2024, employees must make a salary of at least $43,888.00 a year to be considered exempt employees. On April 24, 2024, the U.S. Department of Labor (DOL) issued the final rule on new exemption threshold levels for federal overtime pay for executive, administrative, or professional (EAP) employees and for highly compensated employees (HCEs).

Section 13(a)(1) of the Fair Labor Standards Act (FLSA) mandates that employees are entitled to federal overtime pay protections unless they meet the following three criteria for exemption:

1. they are paid a salary (i.e., they are paid a predetermined amount that is not subject to reduction because of variations in the quality or quantity of work performed);
2. they are paid at least a specified weekly salary level (see chart below); and
3. they primarily perform executive, administrative, or professional duties, as provided in the DOL’s regulations.

Additionally, there is a distinction between standard salary level employees and highly compensated employees. Highly compensated employees must meet the following criteria to be exempt from the FLSA protections:

1. they earn at least a specified total annual compensation amount, which includes at least a specified total amount per week paid on a salary or fee basis (see chart below);
2. their primary duty includes performing office or non-manual work; and
3. they customarily and regularly perform at least one of the exempt duties or responsibilities of an exempt EAP employee.

To meet the salary basis portion of the exemption tests, employers must pay their employees in accordance with the new thresholds:

Starting July 1, 2027, the DOL will update the threshold levels again, and it plans to update them automatically every three years thereafter.

If you need help making sure your business is compliant with the FLSA regulations, please do not hesitate to reach out to Daniel Crowell, Joseph Harris, or Stephen Stovall.