As summer approaches, employers of salaried workers, guided by DC Employment Lawyers, should brace themselves for anticipated changes to the salary basis threshold for certain categories of exempt employees under the Fair Labor Standards Act (FLSA).
As a timely reminder, on August 30, 2023, the U.S. Department of Labor (DOL) initiated a notice of proposed rulemaking to raise (i) the minimum salary amount required for executive, administrative, or professional employees, and (ii) the requisite annual compensation for “highly compensated employees” to maintain exemption from the FLSA’s federal overtime pay requirements. (It’s worth noting that certain states may impose minimum exempt salary thresholds higher than the current or proposed federal minimum.)
In essence, the proposed rule aims to boost the minimum salary essential for an executive, administrative, or professional employee to be considered exempt, from $684 per week ($35,568 annually) to $1,059 per week ($55,068 annually). Moreover, the DOL seeks to elevate the annualized salary threshold for “highly compensated employees” from $107,432 per year to $143,988 per year. It’s crucial to recognize that the figures proposed by the DOL were grounded in 2022 earnings data, and if enacted, the final rule amounts might surpass the current proposals.
Although the proposed rule welcomed public commentary until November 7, 2023, the DOL has yet to issue a final rule, with expectations of its release sometime in 2024. Presuming a timeline akin to the 2019 enactment of a final rule, it’s foreseeable that a final rule on the exempt salary threshold might come into play around July 2024. However, it’s pertinent to acknowledge the potential for legal challenges, akin to those faced by similar Obama-era rules, which could extend the process of enactment and enforcement.
Should the final rule be implemented this summer, employers will need to reassess their compensation strategies for exempt employees earning less than approximately $56,000 per year. Employers, with guidance from DC Employment Lawyers, have various options to ensure compliance with the expected increased minimum salary threshold, including maintaining employees’ current salaries but compensating for overtime hours, elevating employee salaries to meet the new threshold, or transitioning employees to an hourly compensation structure. Furthermore, it’s advised for employers to view this change as an opportunity to conduct an internal audit of employee job duties and classifications to ensure proper exemption categorization.