On January 1, 2025, the next phase of the US Department of Labor’s (DOL’s) increase to the salary level for white-collar exemptions is set to take effect despite ongoing legal challenges.
For background, the Fair Labor Standards Act (FLSA) generally requires overtime pay (time-and-a-half) for most employees who work more than 40 hours per week. However, certain workers are exempt from this requirement if they meet a salary and duties test. Recently, the DOL significantly increased the minimum salary level for executive, administrative, and professional exemptions, causing concern among employers nationwide.
Surprisingly, the Fifth Circuit Court of Appeals recently upheld the DOL’s authority to set minimum salary levels for FLSA overtime exemptions in the Mayfield v. US Department of Labor case. This ruling, which defended the Trump administration’s 2020 overtime rule, suggests that the Biden administration’s 2024 overtime rule (raising the minimum salary to $58,656 by January 1, 2025) may also survive pending legal challenges. Although three lawsuits have been filed contesting the 2024 rule on grounds of excessive salary levels, the Fifth Circuit’s precedent indicates that challenges to the DOL’s statutory authority to set any minimum salary are unlikely to succeed. However, this rule could still face further legal tests, particularly over the high salary thresholds.
Next Steps
Employers should closely monitor ongoing legal challenges to stay informed about developments regarding the DOL’s new rule. While a nationwide injunction is still possible, employers should assess their salaried workforce before the next scheduled increase to $1,128 per week ($58,565 per year) on January 1, 2025. This assessment will help determine if employees might fall below the new salary threshold. Depending on the outcome of legal challenges, salary adjustments or reclassification of employees to non-exempt workers entitled to overtime pay may be necessary.
Additionally, employers must remember that the salary level is only one part of the exemption test. Exempt employees must also meet the “duties test,” meaning their job duties must primarily involve executive, administrative, or professional functions, as defined in the regulations. Employers must also comply with the salary basis requirements, ensuring that exempt employees regularly receive a predetermined amount of compensation each pay period, which is not reduced due to variations in the quality or quantity of work. Detailed information on exemptions and requirements is available on the DOL’s website.
Multistate employers must also consider state laws that may require higher salary levels than those proposed under the federal rule or have additional standards for exemption duties. Currently, Alaska, California, Colorado, New York, and Washington have higher salary level requirements for certain exemptions. Where federal and state laws differ, employees must be paid according to the law with a higher salary.
For additional details on the DOL’s Final Rule, refer to this prior post from HR Works.
HR Works will continue to monitor this topic and provide additional information as it becomes available.
HR Works Can Help
Current HR Works’ Virtual HR Helpline subscribers have unlimited access to answers to questions about the proposed FLSA exempt salary increase, as well as other HR and employment law topics, and 24/7 access to HR Works’ attorney-reviewed online compliance resource center (Comply), which offers human resources tools, forms, and other compliance resources. Additionally, Virtual HR Helpline subscribers receive two free FLSA Assessments each year (with the option to purchase additional assessments for a fee). The HR Helpline can be reached at hrhelp@hrworks-inc.com or by calling 888-668-1271.
HR Strategic Services clients may contact their designated HR Consultant for additional guidance and assistance with these changes and/or to request FLSA Assessments.
Non-HR Works clients may contact us for HR solutions by calling toll-free at 1-877-219-9062 or visiting our website.
