The U.S. Department of Labor (Department) has issued a final
rule that changes the salary threshold necessary for white-collar employees to
be classified as exempt from overtime requirements under the Fair Labor
Standards Act (FLSA). For a white-collar employee to be
considered exempt under the FLSA, the following three criteria must be met:

   (1) The employee
must be paid a fixed salary;

   (2) The salary
must meet a minimum specified amount; and

   (3) The employee must primarily be engaged
in executive, administrative, or professional duties.

The overtime rule raises the salary-threshold levels in two
phases. Beginning July 1, 2024, the threshold initially increases from $684 per
week to $844 per week. The second phase begins January 1, 2025, at which time
the threshold increases to $1,128 per week (equivalent to $58,656 per year).

But the increases don’t stop there. In drafting the rule,
the Department recognized the need to update earnings thresholds regularly.
As a result, the threshold will automatically increase every three years
beginning July 1, 2027. The automatic increases are based upon wage data at the
time of the update.

While lawsuits challenging the Department’s authority to
increase the overtime threshold have been filed, it would be prudent for employers
to examine the salaries of existing exempt employees and remain prepared to
affect salary increases should those challenges fail.

Post Authored by Kevin Sterk, Ancel Glink