The passing of July 1, 2024, brought changes to the salary minimums required for certain employees to be properly classified as "exempt" under the Fair Labor Standards Act (FLSA). However, confusion quickly set in as a federal court in Texas enjoined these changes with respect to Texas government employees only. Put differently: for now, the Final Rule is the "law of the land" for the vast majority of workers covered by the FLSA.
As we described in our prior alert, DOL's final rule makes these changes:
- The final rule increases the salary thresholds required to meet the exemption classification requirements. (It makes no changes to the other criteria – including the duties test.) As of July 1, 2024, the standard salary threshold for employees subject to the bona fide executive, administrative, professional, and outside sales exemptions (the so-called "white collar" exemptions) is $43,888 per year ($844 per week). As of January 1, 2025, the standard salary threshold will increase to $58,656 per year ($1,128 per week).
- Similarly, the final rule will update (by increasing) the earnings threshold for the highly compensated employee exemption. As of July 1, 2024, the salary threshold for the highly compensated employee exemption is $132,964 per year. As of January 1, 2025, it will increase to $151,164 per year.
- As of July 1, 2027, and every three years thereafter, the standard salary threshold for FLSA overtime exemptions will be recalculated. Threshold increases are likely to occur every three years thereafter.
Legal Challenges That Could Impact the Final Rule
In the coming weeks, we expect to hear more from the courts in Texas and across the country. There are at least three pending actions – State of Texas v. U.S. Department of Labor, Flint Ave., LLC v. U.S. Department of Labor, and Mayfield v. U.S. Department of Labor – that could ultimately up-end the Final Rule for workers everywhere, not just Texas. As we await rulings in these cases, we advise employers to work closely with counsel to ensure they have the most recent updates and can plan accordingly.
For now, employers should seize the opportunity to analyze current employee classifications to identify those who may need reclassification based on the updated salary thresholds and to correct any inadvertent misclassifications. Employers must also prepare for a further increase on January 1, 2025.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.