Update Applicable to:	Effective date
All employers with at least 1 “White Collar” Exempt Worker	July 1, 2024 – Applicable Rule for EAP. January 1, 2025 – Sections 541.600(a)(2) and 541.601(a)2) for HCE.  July 1, 2027 – Start of Triennial Update to Thresholds.

What happened?

On April 23, 2024, the Department of Labor (DOL) announced that the Overtime Rule is final and will modify the thresholds for the Executive, Administrative, and Professional (EAP), as well as the Highly Compensated Employees (HCE).

What are the details?

Increases salary level for EAP exemptions:

• July 1, 2024: $844/week ($43,888/year)
• January 1, 2025: $1,128/week ($58,656/year)

Increases salary level for HCE test:

• July 1, 2024: $132,964/year
• January 1, 2025: $151,164/year

The standard salary level and HCE total annual compensation will increase at the initial update on July 1, 2024, and then again on the applicability date for the new methodologies on January 1, 2025, and then every 3 years beginning on July 1, 2027.

Below is a summary of the main points that employers should consider, but reviewing the Final Rule is recommended:

EAP Exemption Status:

• The employer is responsible for establishing the applicability of the exemption.
• Job titles and descriptions do not determine EAP exemption status: It must meet the salary and duties test.
• The new standard salary level, combined with the standard duties test, will better define which employees are employed in a bona fide EAP capacity.
• This will ensure fewer lower-paid white-collar employees who perform significant amounts of nonexempt work are included in the exemption.

HCE Exemption:

• The Department is increasing the earnings threshold for the HCE exemption.
• The HCE test is a streamlined alternative for highly compensated employees.
• The Department adopts its proposal to set the HCE threshold equal to the annualized weekly earnings of the 85th percentile of full-time salaried workers ($151,164). This change to the standard salary level methodology and the change to the HCE total annual compensation methodology will have a delayed applicability date.

Update Mechanism for Salary Increments:

• A new updating mechanism is being established.
• Subsequent triennial updates will apply the most recent four quarters of data to the standard salary and HCE total annual compensation levels in effect at the time of the updates.

To further help employers understand, the following is a breakdown of the salary thresholds in weekly, biweekly, semimonthly, monthly, and annual amounts. The smallest period to calculate the threshold remains weekly.

EAP Threshold	Current		As of July 1, 2024		As of January 1, 2025
Weekly	$684		$844		$1,128
Biweekly	$1,368		$1,688		$2,256
Semimonthly	$1,482		$1,828.67		$2,444
Monthly	$2,964		$3,657.33		$4,888
Annual	$35,568		$43,888		$58,656

Business Considerations

• Employers should familiarize themselves with the details of the DOL Overtime Rule, especially the EAP and HCE exemption thresholds; understanding the criteria for these exemptions is crucial as job titles or descriptions do not determine exemption status.
• Employers should review the duties and compensation of their employees to ensure that they are correctly classified as exempt or non-exempt, especially with the new standard salary level in place.
• With the increase in the standard salary thresholds, employers should plan for potential salary adjustments, particularly for the initial update on July 1, 2024, and the subsequent update on January 1, 2025.
• Employers should monitor the automatic updates to the standards because these will occur every 3 years, starting from July 1, 2027. The methodologies used for these updates may change over time, so it is important to stay informed.
• Employers should plan to communicate with their employees about these changes: transparency about how these regulations affect their employment status and compensation can help maintain a positive work environment and retain talent.
• Given the complexity of employment law and the potential penalties for non-compliance, it is recommended to seek advice from an attorney who can provide guidance tailored to your specific situation.

Source References

• DOL will raise overtime salary threshold to $44K in July, $59K next year (Industry Dive)
• Reminder: DOL Overtime Rule Expected for April with Compliance Recommendations (VensureHR)
• DOL Press Release Overtime Rule
• DOL Final Rule: Restoring and Extending Overtime Protections
• DOL Overtime Rule

Resources

• 10 Steps Employers Can Take Now to Prepare for $59k Salary Floor (Fisher & Phillips LLP.)
• USDOL finalizes new increases in minimum salaries for white-collar exemptions
• The DOL Announces Final Overtime Rule Increasing FLSA Salary Basis
• U.S. DOL’s New Overtime Rule Increases Exempt Employee Salary Threshold (California Chamber of Commerce)
• FLSA Changes: Decision-Making Guide
• FLSA Changes: Implementation Guide

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