Employers: Start Preparing for a Possible Significant Increase in Wages to Qualify for Overtime Exemption

Posted by: Karen Booher on January 9th, 2024

Last September’s proposed rule by the U.S. Department of Labor (DOL) seeks to increase the minimum salary level from $684 per week ($35,568 annual salary, or $17.10 hourly for full-time employees) to $1,059 per week ($55,068 annual salary, or $26.48 hourly).

Currently, to qualify for an exemption from minimum wage and overtime pay, employees “generally must meet certain tests regarding their job duties and be paid on a salary basis at not less than $684 per week,” as per DOL’s fact sheet. The proposed rule would increase the salary threshold by almost 55%. In addition, the DOL proposed to raise the threshold for the highly compensated employee (HCE) exemption from $107,432 annually to $143,988 per year.

The DOL predicts that the proposed increase in the minimum salary level will make 3.4 million workers no longer “exempt”. Similarly, the increase in the HCE total annual compensation level is estimated to make 248,900 employees unqualified for exempt status.

The DOL last adjusted the FLSA regulations three years ago, and the proposed regulations seek to automatically adjust threshold earnings every three years going forward.

What Should Employers Be Doing Now?

Employers should start determining how many of their employees would change from “exempt” to “non-exempt” under this proposed rule. Also, they should evaluate all “exempt” employees to ensure they meet the duties test.

The proposed rule is anticipated to be finalized in April 2024, so stay tuned!

Source:

ASA Staffing Today, 12/28/2023. “12 Days of Handbook Updates: Overtime and FLSA Exemptions”, by Emily Lodge, Barnes & Thornburg LLP, December 21, 2023.