Recent ruling: Changes to salary thresholds for exempt employees
Get ready for some game-changing news! We’re diving into the latest updates to the white-collar exemption under the Fair Labor Standards Act (FLSA).
What’s new?
- Increased minimum salary
- Effective July 1, 2024, the minimum salary level for executive, administrative or professional employees to be classified as exempt has risen from $684 per week ($35,568 per year) to $844 per week ($43,888 per year).
- On Jan. 1, 2025, this minimum salary will increase to $1,128 per week ($58,656 per year).
- Highly compensated employee (HCE) exemption
- The annual compensation threshold for the highly compensated employee exemption has also been adjusted.
- Starting July 1, 2024, the threshold is $132,964, which will increase to $151,164 on Jan. 1, 2025.
- HCE exemption applies to employees earning above this threshold.
- Automatic updates
- Going forward, the salary thresholds will be automatically updated every three years.
- Starting July 1, 2027, and every triennial cycle thereafter, the thresholds will adjust based on changes in worker salaries.
What clients need to know
- Review employee salaries
- Clients should review their employees’ salaries to ensure compliance with the new thresholds.
- If an employee’s salary falls below the minimum, consider reclassifying them as non-exempt and paying overtime as required.
- Evaluate job duties
- Remember that salary alone does not determine exempt status.
- Employees must also meet the “duties” tests specific to their job category (executive, administrative, professional or computer employee).
- Stay informed
- Keep an eye on future updates. The automatic triennial adjustments will provide predictability for planning.
The recent changes to the white-collar exemption aim to strike a balance between fair compensation and workforce management. As a client, understanding these updates is essential to avoid legal pitfalls and ensure compliance.
Find more information about the white-collar exemption in the HR Resource Center.
The information provided in this document does not, and is not intended to, constitute legal advice. Instead, all information, content and materials available here are for general informational purposes only. If you require legal advice, we strongly recommend that you consult with a qualified attorney. Only your individual attorney can provide personalized advice tailored to your specific situation and jurisdiction. This document should not be relied upon as a substitute for professional legal counsel.