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Instructor
Margie Faulk
The U.S. Department of Labor released a final rule on April 23, 2024, raising the salary threshold to qualify for certain overtime exemptions under federal law. Most importantly, it significantly raises the minimum salary threshold for certain “white collar” workers-executives, professionals, and administrative personnel.
The rule implements a two-part increase to the standard minimum salary level applicable to the overtime exemptions for executive, administrative, and professional (EAP) employees under the Fair Labor Standards Act (FLSA). The first part increases the standard minimum salary level to $844 per week on July 1, 2024. The second part increases the standard minimum salary level to $1,128 per week on January 1, 2025, which represents a nearly 65 percent increase from the current level of $684 per week.
The final rule focuses on three key updates to the earnings thresholds for the EAP exemptions: (1) increasing the standard minimum salary level, (2) increasing the annual salary threshold for HCE employees, and (3) implementing an automatic update to the earnings thresholds every three years.
The DOL abandoned its proposals to apply the standard salary level to the U.S. territories subject to the federal minimum wage and update the special salary levels for American Samoa and the motion picture industry.
What are the Challenges with this new law? Legal minds speculate that there will be legal challenges to the law. However, Employers need to make decisions on how they manage their options in preparation for the law and not wait for court cases to start their planning for compliance.
Employers should learn that the previous overtime increase created severe complications regarding communications to impacted employees, a decrease in staff morale for those who believed that it was a demotion, loss of benefits when they decided to reduce hours, and costs, challenges with job descriptions and expected impact in Employer’s budget. It led to an increase in turnover and a decrease in retention.
Employers can take the time to review and prepare for setting guidelines on how they communicate the impact to employees, make effective decisions on how to cut costs without reducing employee hours or benefits and develop a training program for managers and newly non-exempt employees.