By Michael Homans
May 2024
By now, most employers and employees should have received the news that the U.S. Department of Labor has published its Final Rule to increase the base salary level for white-collar jobs to be exempt from overtime pay requirements under the Fair Labor Standards Act (FLSA).
In a nutshell, the minimum base salary level for executive, professional and administrative employees (in addition to rates for outside sales and computer professionals) to be exempt will increase from $684 per week to $844 per week (equivalent to $43,888 per year), effective July 1, and increase again to $1,128 per week ($58,656 per year) effective January 1, 2025. In addition, the “highly compensated executive” exemption will require total pay of $132,964 per year effective July 1 and $151,164, effective January 1, 2025. Further increases will occur in 2027 and every three years thereafter.
See this link for further details and links to the actual revised rule and regulations.
While these higher salaries will create financial challenges for many employers, large and small, they also present opportunities for course correction, including to:
- Correct misclassifications of non-exempt employees who have been improperly classified as salaried exempt employees. The new FLSA rule can be used as the reason to review and change the pay system for such employees, without flagging that the employer may have been paying them wrong all along.
- Shift low-level managers who are making just above the current threshold to hourly, non-exempt positions, avoiding the risk of overtime violations in the future.
- Consider hiring more employees to reduce the hours per worker and the risk of overtime costs, thus reducing overall personnel costs.
The rule is subject to challenge in the courts and by Congress, of course, but employers should be prepared to comply by July 1. HomansPeck stands ready to assist and advise in these transitions.
Michael Homans is an employment lawyer and litigator based in Philadelphia and Wayne, Pennsylvania. He can be reached at mhomans@homanspeck.com or (215) 419-7477.