Overtime Exemptions: Salary Threshold Increases Issued by The DOL

On April 23, 2024, the Department of Labor issued a final rule (the “2024 Rule”) significantly increasing the salary thresholds governing the overtime exemptions under the Fair Labor Standards Act for executive, administrative, and professional (EAP) employees and highly compensated employees.  The 2024 Rule also sets a new methodology for determining future applicable salary thresholds.  Implementation of the 2024 Rule is split into three phases, the first of which occurred on July 1, 2024.  The second phase is set to take effect on January 1, 2025, with the third phase ushering in the new methodology of configuring the updated salary levels beginning July 1, 2027, with automatic increases every 3 years thereafter.

Effective July 1, 2024, the salary threshold for EAP employees increased by $8,320 to a salary of $43,888 per year, with the threshold for highly compensated employees increasing by $25,532 to a salary of $132,964 per year.  These increases are based upon the 2019 previously set 20^th percentile of weekly earnings of full-time EAP salaried employees in the lowest-wage Census region, and the 80^th percentile for highly compensated salaried employees nationally.

The second phase of implementation, set to take effect on January 1, 2025, will see an increase based upon the 35^th percentile of weekly earnings of full-time EAP salaried workers in the lowest-wage Census region, and the 85^th percentile for highly compensated salaried employees nationally.  At that time, the EAP employee threshold will see an increase of $14,768 to a salary of $58,656 per year, with an increase of $18,201 to an annual salary of $151,164 for highly compensated employees.  Beginning July 1, 2027, the Secretary of the Department of Labor will determine the update amounts based upon the current earnings data at that time, with automatic increases every 3 years thereafter.

Current legal challenges in Texas have temporarily postponed the increases from taking effect for Texas State employees only.  While at least 13 other states, including Ohio, have joined the Texas case with an Amicus Brief seeking a nationwide permanent injunction blocking subsequent threshold increases, employers cannot assume that the remaining phases of the 2024 Rule will be blocked.

Employers should assess their employee classifications now to ensure current and future compliance with the 2024 Rule, both in terms of salary threshold and job duties.  If you would like further assistance in this area or have any employment questions, please contact our Labor and Employment practice group at kulrich@ssdlaw.com or 937.222.2500.

By:  Karl R. Ulrich, Esq. and Emily L. Rutter, JD

For more information, please contact Karl Ulrich at 937.222.2052 or by email at kulrich@ssdlaw.com.

This material is not intended as legal advice and is for general informational purposes only.  Those seeking legal advice should consult directly with legal counsel regarding their specific facts and circumstances.