Portland: 207.773.4775
Boston: 617.973.1550

U.S. Department of Labor Increases Minimum Salary Thresholds for White Collar Exemptions, Effective July 1, 2024.

U.S. Department of Labor Increases Minimum Salary Thresholds for White Collar Exemptions, Effective July 1, 2024

April 29, 2024

On April 23, 2024, the U.S. Department of Labor (“DOL”) issued its Final Rule substantially increasing the minimum salary threshold required for exempting eligible “white collar” employees from minimum wage and overtime payments.  These white collar exemptions cover executives, administrators, and professionals as those terms are defined by the Fair Labor Standards Act (“FLSA”).

In addition to the imposition of steep increases in the minimum salary threshold for the three white collar exemptions, DOL’s Final Rule increases the minimum salary threshold for employees exempt as a highly compensated employee.  Finally, DOL also made modest adjustments to the factors used to assess whether an employee is eligible for the outside sales exemption.

The change in the minimum salary threshold for white collar jobs could trigger overtime pay entitlement for as many as 4 million employees.  In order to be classified as a salaried exempt white collar employee, the employee must satisfy both the minimum salary threshold as well as the job duties test for at least one of the three white collar exemptions.  Although DOL is increasing the minimum salary threshold for white collar exemptions, DOL retained the existing job duties test for these exemptions.

The Final Rule faces legal challenges creating uncertainty regarding its fate.  Absent court intervention, effective July 1, 2024, the minimum salary threshold for employees who meet the job duties test for FLSA’s executive, administrative or professional exemptions shall increase from $684 per week ($35,568 annually) to $844 per week ($43,888 annually).

For employers in certain states, this initial July 1, 2024 increase in the FLSA minimum threshold will not be as dramatic.  As an example, Maine law already sets the minimum salary threshold at $816.35 per week ($42,450.20 annually).  New York’s minimum salary threshold is $1,124.20 per week ($58,458.40 annually, and $1,200 per week / $62,400 annually in New York City and Nassau, Suffolk and Westchester counties).  If an employer’s applicable state law provides for a higher minimum threshold than federal law, then the employer must follow the state law.

Absent court intervention, effective January 1, 2025, the minimum salary threshold under the FLSA for the three white collar exemptions shall jump to $1,128 per week ($58,656 annually).  New York’s minimum salary threshold will increase to $1,161.65 per week ($60,405.80 annually, and will increase to $1,237.50 per week / $64,350 annually in New York City and downstate).  Thus, New York state’s minimum salary threshold will exceed the FLSA minimum.

The new rule does not change the provision in the current rule allowing employers to use non-discretionary bonuses and incentive payments, including commissions, to satisfy up to 10% of the salary level for the white collar exemptions.  Unfortunately, many state wage and hour laws do not recognize this 10% rule.

The FLSA also provides an exemption for highly compensated employees whose primary duty includes office or non-manual work and who customarily and regularly perform at least one of the exempt duties of an exempt executive, administrative or professional employee.  The minimum salary threshold for this exemption will increase from the current $107,432 per year to $132,964 per year on July 1, 2024, and to $151,164 per year as of January 1, 2025.  Please note that if applicable state wage law does not recognize the highly compensated employee exemption, then an employer in that state cannot take advantage of this exemption.

Employers must identify salaried exempt employees who are currently paid a salary lower than the new minimum salary thresholds and address their payroll status.  Otherwise, the employer will be exposed to liability for overtime payments to these employees which can be doubled or trebled depending upon both federal and applicable state laws.

For more information regarding the Final Rule or questions about other labor and employment law matters, please contact:

Peter Bennett (pbennett@thebennettlawfirm.com)
Rick Finberg (rfinberg@thebennettlawfirm.com)

Contact Us

    The Bennett Law Firm, P.A.
    PORTLAND OFFICE
    Tel: 207.773.4775

    BOSTON OFFICE
    Tel: 617.973.1550
    MAILING ADDRESS
    75 Market Street, Suite 201
    Portland, ME 04101
    © 2024 The Bennett Law Firm, P.A. All rights reserved. | Sitemap