On April 23, 2024, the U.S. Department of Labor (DOL) issued a Final Rule updating the
salary threshold for the White Collar Exemptions under the Fair Labor Standards Act (FLSA). The
last update to the salary threshold took place on January 1, 2020, when the threshold was
increased from $455/week ($23,660/year) to $684/week ($35,568/ year). Unless enjoined by a
court ruling, the Final Rule would increase the salary threshold in multiple stages, as follows:
- Effective July 1, 2024: $844/week, or $43,888 annually (a figure tied to the 20th percentile
of weekly earnings of full-time non-hourly workers in the lowest wage Census Region
and/or retail industry nationally – the current methodology). - Effective January 1, 2025: $1,128/week, or $58,656 annually (a figure tied to the 35th
percentile of weekly earnings of full-time non-hourly workers in the lowest wage Census
Region). - Effective July 1, 2027, and every 3 years thereafter: the salary threshold will be updated
to reflect then-current earnings data, using the 35th percentile of full-time non-hourly
workers in the lowest wage Census Region or such other methodology then in effect.
Up to 10% of the required salary amount may be satisfied by the payment of non-discretionary
bonuses, incentives, and commissions that are paid annually or more frequently.
The exemption for highly compensated employees will be updated to reflect that effective
July 1, 2024, a highly compensated employee must earn at least $132,964 (up from the current
$107,432) in total annual compensation. On January 1, 2025, the figure rises to $151,164 per
year. Like the regular salary threshold, the threshold for highly compensated employees will also
be updated every three years.
The Final Rule also updates the regulatory language relating to additional payments for
exempt White Collar employees, clarifying that employees who are paid at least $1,059 each week, paid on a salary basis, may be paid additional amounts without losing the exemption or
violating the salary basis requirement.
The Final Rule does not propose any specific changes to the duties tests necessary to
qualify for the White Collar Exemptions. The Final Rule also does not change the special salary
thresholds in effect for Puerto Rico, Guam, the U.S. Virgin Islands, and the Commonwealth of the
Northern Mariana Islands.
Many business leaders and HR professionals will remember that when the Obama
Administration attempted to significantly increase in the White Collar Salary Threshold in 2016,
legal challenges were mounted that eventually resulted in an 11th hour injunction (after many
businesses has already put their wage changes into effect). The DOL telegraphed its expectation
of similar legal challenges in this go-around by adding a severability provision to the Final Rule –
this provision would allow a court to strike some provisions of the Final Rule while leaving others
intact.
While we believe that legal challenges to the Final Rule are likely, we also believe it is
prudent for all employers to conduct a preliminary assessment of their exempt employees, to flag
potential problem areas in advance. Employers should also keep in mind that differences
between the FLSA and the Pennsylvania Minimum Wage Act add some complications to this
process. Even if some or all of the Final Rule is struck down by court action, this provides a good
opportunity for all employers to evaluate their compliance with the FLSA and state minimum wage
laws.
If you have any questions about the Final Rule, or would like to assess your wage and
hour compliance, please contact our office. Thank you.
This Client Alert provides a general summary of new legal developments, and is not meant
to provide legal advice. If you have any questions or concerns about this Client Alert, please do
not hesitate to contact us at (570)341-8800.
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