Insight

Department of Labor Issues Final Rule on Salary Threshold to Qualify for Overtime

On April 23, 2024, the U.S. Department of Labor released a final rule that raises the salary threshold to qualify for certain overtime exemptions under the Fair Labor Standards Act.

Rachel K. Steinhofer

Rachel K. Steinhofer

April 29, 2024 10:23 AM

On April 23, 2024, the U.S. Department of Labor released a final rule that raises the salary threshold to qualify for certain overtime exemptions under the Fair Labor Standards Act.

EAP Exemption

The Fair Labor Standards Act (“FLSA”) generally requires an employer to pay an employee time and a half for all hours worked in excess of 40 hours in one work week. Employees who are employed in a bona fide executive, administrative, or professional capacity (“EAP” or “white-collar” exemption) are exempt from minimum wage and overtime protections. To fall within the EAP exemption, an employee must generally meet three tests:

  1. Be paid a salary;
  2. Be paid at least a specified weekly salary level; and
  3. Primarily perform executive, administrative, or professional duties, as provided in the DOL’s regulations.

The DOL’s final overtime rule increases the standard salary level for white collar exempt employees in two stages:

  • On July 1, 2024, the standard level will increase from $684 to $844 per week ($43,888 annually).
  • On January 1, 2025, the standard level will increase to $1,128 per week ($58,656 annually).

HCE Exemption

Employees who are paid a salary, earn above a higher total annual compensation level, and satisfy a minimal duties test fall within the exemption for highly compensated employees (“HCE”). The final rules also increases the annual total compensation for the HCE exemption from $107,432 to $151,164 in two stages:

  • On July 1, 2024, the HCE level will increase from $107,432 to $132,964 per year.
  • On January 1, 2025, the HCE level will increase to $151,164 per year.

The final rule includes a mechanism for automatically updating these salary and compensation levels every three years based on then-current earnings data. The first automatic update will occur on July 1, 2027.

The final rule does not change the current rule which allows employers to use non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the standard for special salary levels for the exemptions.

Although the final rule will likely face legal challenges, employers should consider adjusting compensation structures for exempt employees earning more than $35,564 per year but less than the new EAP exemption minimum of $58,656 per year. Additionally, employers may need to consider reclassifying employees who do not meet the new minimum salary thresholds.

Trending Articles

Presenting The Best Lawyers in Australia™ 2025


by Best Lawyers

Best Lawyers is proud to present The Best Lawyers in Australia for 2025, marking the 17th consecutive year of Best Lawyers awards in Australia.

Australia flag over outline of country

Legal Distinction on Display: 15th Edition of The Best Lawyers in France™


by Best Lawyers

The industry’s best lawyers and firms working in France are revealed in the newly released, comprehensive the 15th Edition of The Best Lawyers in France™.

French flag in front of country's outline

How To Find A Pro Bono Lawyer


by Best Lawyers

Best Lawyers dives into the vital role pro bono lawyers play in ensuring access to justice for all and the transformative impact they have on communities.

Hands joined around a table with phone, paper, pen and glasses

How Palworld Is Testing the Limits of Nintendo’s Legal Power


by Gregory Sirico

Many are calling the new game Palworld “Pokémon GO with guns,” noting the games striking similarities. Experts speculate how Nintendo could take legal action.

Animated figures with guns stand on top of creatures

Announcing The Best Lawyers in New Zealand™ 2025 Awards


by Best Lawyers

Best Lawyers is announcing the 16th edition of The Best Lawyers in New Zealand for 2025, including individual Best Lawyers and "Lawyer of the Year" awards.

New Zealand flag over image of country outline

Announcing the 13th Edition of Best Lawyers Rankings in the United Kingdom


by Best Lawyers

Best Lawyers is proud to announce the newest edition of legal rankings in the United Kingdom, marking the 13th consecutive edition of awards in the country.

British flag in front of country's outline

Announcing The Best Lawyers in Japan™ 2025


by Best Lawyers

For a milestone 15th edition, Best Lawyers is proud to announce The Best Lawyers in Japan.

Japan flag over outline of country

The Best Lawyers in Singapore™ 2025 Edition


by Best Lawyers

For 2025, Best Lawyers presents the most esteemed awards for lawyers and law firms in Singapore.

Singapore flag over outline of country

Announcing the 16th Edition of the Best Lawyers in Germany Rankings


by Best Lawyers

Best Lawyers announces the 16th edition of The Best Lawyers in Germany™, featuring a unique set of rankings that highlights Germany's top legal talent.

German flag in front of country's outline

How Much Is a Lawyer Consultation Fee?


by Best Lawyers

Best Lawyers breaks down the key differences between consultation and retainer fees when hiring an attorney, a crucial first step in the legal process.

Client consulting with lawyer wearing a suit

Celebrating Excellence in Law: 11th Edition of Best Lawyers in Italy™


by Best Lawyers

Best Lawyers announces the 11th edition of The Best Lawyers in Italy™, which features an elite list of awards showcasing Italy's current legal talent.

Italian flag in front of country's outline

Presenting the 2024 Best Lawyers Employment and Workers’ Compensation Legal Guide


by Best Lawyers

The 2024 Best Lawyers Employment and Workers' Compensation Legal Guide provides exclusive access to all Best Lawyers awards in related practice areas. Read below and explore the legal guide.

Illustration of several men and women in shades of orange and teal

Things to Do Before a Car Accident Happens to You


by Ellie Shaffer

In a car accident, certain things are beyond the point of no return, while some are well within an individual's control. Here's how to stay legally prepared.

Car dashcam recording street ahead

Combating Nuclear Verdicts: Empirically Supported Strategies to Deflate the Effects of Anchoring Bias


by Sloan L. Abernathy

Sometimes a verdict can be the difference between amicability and nuclear level developments. But what is anchoring bias and how can strategy combat this?

Lawyer speaking in courtroom with crowd and judge in the foreground

The Push and Pitfalls of New York’s Attempt to Expand Wrongful Death Recovery


by Elizabeth M. Midgley and V. Christopher Potenza

The New York State Legislature recently went about updating certain wrongful death provisions and how they can be carried out in the future. Here's the latest.

Red tape blocking off a section of street

Attacked From All Sides: What Is Happening in the World of Restrictive Covenants?


by Christine Bestor Townsend

One employment lawyer explains how companies can navigate challenges of federal and state governmental scrutiny on restrictive covenant agreements.

Illustration of two men pulling on string with blue door between them