Fair Labor Standards Act Annual Salary Threshold Increase

The U.S. Department of Labor has announced a final rule for the annual salary-level threshold within the Fair Labor Standard’s Act. The previous minimum salary requirement to be considered an exempt employee is currently $35,568. This amount will increase on July 1, 2024, to $43,888 per year and then the amount will increase again to $58,656 per year on Jan. 1, 2025. Subsequently, this salary threshold will increase on July 1, 2027, and every three years thereafter. In addition to the salary threshold, employees must have certain job duties and responsibilities. For most city employees, these are the executive, administrative, and professional exemptions. These exemption tests remain unchanged despite the Department of Labor amending the salary threshold.

Employers need to identify impacted employees and determine whether to increase the salary of those exempt employees who earn above the overtime threshold under the old standard but below the new standard. This way, these employees could remain exempt. Employers who choose not to raise current exempt employees’ salaries who are under the new $58,656 salary threshold will need to pay overtime to these employees when they work more than 40 hours in a workweek. Employers should look at the potential costs and budget impact when making this decision.

Please contact KLC Personnel Services Attorney Michael Simon with any questions.