The U.S. Department of Labor has increased the Fair Labor Standards Act's (FLSA's) annual salary-level threshold from $35,568 to $58,656 as of Jan. 1, 2025, for white-collar exemptions to overtime requirements. Effective July 1, 2024, the salary threshold will increase to $43,888. Employees making less than the salary-level threshold, such as hourly workers, can be eligible for overtime if they work enough hours.
Starting July 1, 2027, the department also will automatically increase the overtime threshold every three years.
To be exempt from overtime under the FLSA's “white collar” executive, administrative, and professional exemptions—the so-called white-collar exemptions—employees must be paid a salary of at least the threshold amount and meet certain duties tests. If they are paid less or do not meet the tests, they must be paid 1 1/2 times their regular hourly rate for hours worked in excess of 40 in a workweek.
Takeaway for employers: Employers now must decide whether to raise the salary of those employees who earn above the overtime threshold under the old standard but below it under the new standard so they remain exempt. Employers who choose not to raise these employees’ salaries should be prepared to pay them overtime when they work more than 40 hours in a workweek. Schedules for those employees whose salaries are not raised above the new threshold may need adjusting to limit overtime costs. Careful communication should be rolled out to explain why employees formerly categorized as exempt are now nonexempt.
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DISCLAIMER: The information provided herein does not constitute the provision of legal advice, tax advice, accounting services or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional legal, tax, accounting or other professional advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation and for your particular state(s) of operation.
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