April 25, 2024 - Los Angeles, California

The DOL Announces New Overtime Exemption Rule Increasing the Salary Threshold for Exempt Employees
  by Alexandra Shulman

By: Leah Lively and Alexandra Shulman

On April 23, 2024, the U.S. Department of Labor’s (DOL) Wage and Hour Division (WHD) announced a final rule, “Defining and Delimiting the Exemptions for Executive, Administrative, Professional (EAP), Outside Sales and Computer Employees,” increasing the salary threshold for an employee to qualify for exempt status under the Fair Labor Standards Act (FLSA). The final rule takes effect on July 1, 2024. The DOL estimates that 4 million workers who are currently classified as exempt under the FLSA will become newly non-exempt and, therefore, entitled to overtime. While there may be legal challenges to the final rule that delay its implementation, employers should not wait to review employee classification and be caught unprepared.

Brief Overview

As most employers are aware, certain employees may be exempt from the FLSA’s overtime requirement if they meet the criteria. To fall within the Executive/Administrative/Professional exemption (the “EAP exemption”), an employee generally must:

1. be paid a salary, meaning that they are paid a predetermined and fixed amount that is not subject to reduction because of variations in the quality or quantity of work performed (the “salary basis test”);

2. be paid at least a specified weekly salary level (the “salary level test”); and

3. Primarily perform executive, administrative, or professional duties, as provided in the DOL’s regulations (the “duties test”).

The DOL’s regulations also provide an alternative test for certain highly compensated employees (“HCEs”) who are paid a salary, earn at least a higher total annual compensation level, and satisfy a minimal duties test.

Increased Salary Thresholds

The salary thresholds are scheduled to increase as follows:

Date EAP Exemption

Salary Threshold

HCE Salary Threshold
Current $684/week ($35,568/year) $107,432/year
July 1, 2024 $844/week ($43,888/year) $132,964/year
January 1, 2025 $1,128/week ($58,656/year) $151,164/year
July 1, 2027, and every three years thereafter To Be Determined To Be Determined


What Employers Should Do Now

The final rule is a major adjustment to the salary threshold that will affect most employers. Any employers who utilize the EAP or HCE exemptions should consider taking the following steps to prepare:

If you have any questions about the DOL’s final rule, please feel free to contact the attorneys listed below:

Leah Lively is a Shareholder in Buchalter’s Portland, Seattle, and San Diego offices and a member of Buchalter’s Labor & Employment and Litigation practice groups.

Alexandra (Alex) Shulman is a Senior Counsel in Buchalter’s Seattle and Portland offices and a member of Buchalter’s Labor and Employment and Litigation practice groups.

This communication is not intended to create or constitute, nor does it create or constitute, an attorney-client or any other legal relationship. No statement in this communication constitutes legal advice, nor should any communication herein be construed, relied upon, or interpreted as legal advice. This communication is for general information purposes only regarding recent legal developments of interest, and is not a substitute for legal counsel on any subject matter. No reader should act or refrain from acting on the basis of any information included herein without seeking appropriate legal advice on the particular facts and circumstances affecting that reader. For more information, visit www.buchalter.com.

Read full article at: https://www.buchalter.com/publication/the-dol-announces-new-overtime-exemption-rule-increasing-the-salary-threshold-for-exempt-employees/