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Finally!? DOL Cranks Up Exempt Salary Threshold Near $60,000
Wednesday, April 24, 2024

We’ve all known this day was coming—it was just a matter of time. From the moment the Biden Department of Labor (“DOL”) announced that the Trump DOL’s 2020 increase to the Fair Labor Standards Act salary threshold for the so-called “white collar” exemptions (primarily the executive, administrative, and professional exemptions (“EAP”)) was not good enough, it became crystal clear that a new rule was in the works.

Although it took the DOL some time to put its thoughts together, it issued the proposed new rule in September 2023, and awaited public comments—33,000 of those followed. After reviewing each of the comments, the DOL announced its final rule yesterday. Here are the basics:

  • It will be effective as of July 1, 2024.
  • There are no changes to the duties tests (perhaps the only positive news).
  • The new salary thresholds for the EAP exemptions and the highly compensated employee (“HCE”) exemption essentially will be phased in beginning on July 1, 2024, and then fully implemented on January 1, 2025.
    • Note: On July 1, 2024, the DOL is implementing an interim increase to the thresholds (as noted below) that is based on current earnings data using the methodology established in the Trump DOL’s final rule.
    • Then, on January 1, 2025, the DOL will use the new methodology to establish the full salary thresholds.
  • Beginning on July 1, 2027, and every three years thereafter, the DOL will update the salary thresholds to align with the then-current earnings data.
  • Here’s a chart based on the DOL’s FAQ that provides the relevant data points:
Before 7/1/2024 $684/wk ($35,568/yr) $107,432
7/1/2024 $844/wk ($43,888/yr) $132,964
1/1/2025 $1,128/wk ($58,656/yr) $151,164
1/1/2027 (and every three years thereafter) TBD based on 35th percentile of full-time salaried earnings in lowest Census region TBD based on 85th percentile of full-time salaried employees nationally

Where’s the good news for employers, you ask? Uh, there really isn’t any … except maybe that the new salary threshold is not immediately rising to $60,000 and the expectation that any one of a number of business organizations is likely to challenge the new rule, perhaps using a number of the theories raised in the fighting that ultimately resulted in the rule being blocked by Judge Mazzant in the federal court in the Eastern District of Texas.

If the above did not wake you up, please keep in mind that the DOL has projected that costs for employers in the first year of this new rule will be about $1.4 billion and the rule will make four million workers newly eligible for overtime pay (unless their employer intervenes in some fashion).

So, what do you do? Grab your popcorn and watch the challenges to the new rule roll in? Maybe—but you should start considering those currently exempt employees who fall in the “danger zone” between $35,568 annually and $43,888 annually and evaluate whether you can consider a raise to the new threshold or instead need to potentially reclassify them to non-exempt status. Fortunately, that danger zone (leading up to July 1, 2024) is somewhat narrow when compared to what will come on January 1, 2025. At least the phased implementation provides a longer window to watch the anticipated legal challenges unfold. As an added note of caution, you should remember that current state law minimum salary thresholds like those that exist in New York and California, which are significantly higher than those in the DOL rule, continue to apply. Don’t touch that dial!

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