【Client Alert】DOL: The Final Minimum Salary Rule for FLSA’s White-Collar Exemptions (Update)
On November 15, 2024, the US District Court for the Eastern District of Texas issued a nationwide injunction against the “white collar” overtime exemption under the Fair Labor Standards Act (FLSA). This decision temporarily halts these new rules from going into effect. Employers should continue to monitor and pay close attention to future court developments.
Recently the Department of Labor (DOL) announced a significant increase in the minimum salary for FLSA’s white-collar exempt employees. However, a federal judge in Texas has enjoined the DOL from enforcing the rule to Texas government employees.
For now, with the exception of the State of Texas, employers must comply with the new minimum salary floor for exempt employees. Injunction ruling for the State of Texas employees may foreshadow wider injunction in other cases or in other states. Regarding the enforcement of these DOL regulations, further actions by state governments and industries will continue to be closely monitored.
Important Update on
Department of Labor’s New Salary Threshold Requirements
I hope this message finds you well. We are writing to inform you of an important regulatory update from the Department of Labor (DOL) that will impact employment practices beginning July 1, 2024.
Recently, the DOL announced a significant increase in the minimum annual salary threshold required for employees to qualify as EAP exempt (Executive, Administrative, Professional) or HCE (Highly Compensated Employee). Effective July 1, 2024, to qualify for EAP exempt status, an employee must be paid a minimum annual salary equivalent to $43,888, which translates to $844 per week. Employers operating in states/cities with higher salary thresholds for exempt employees must adhere to the state/city law over the federal law. Please note that states such as CA, CO, NY and WA have such laws.
We recommend reviewing the salaries of your current exempt employees to ensure they meet the new threshold. Employers may use nondiscretionary bonuses and incentive payments (including commissions) paid on an annual or more frequent basis, to satisfy up to 10 percent of the standard salary level. Additionally, if after the 52-week period, the employer has not met its financial obligation, the employer can make a final “catch-up” payment within one pay period after the end of the 52-week period to bring an employee’s compensation up to the required level. For those employees who do not currently meet the updated salary requirement, you may need to consider adjusting their salaries accordingly or reclassifying their status to non-exempt.
Additionally, we would like to inform you that there is another planned increase in January 2025 and beyond. As of now, the DOL plans to review the minimum salary threshold every 3 years. For the latest development, please check https://www.dol.gov/agencies/whd/overtime/salary-levels.
Thank you for your attention to this matter. We appreciate your continued partnership and look forward to supporting you through this transition.
Warm regards,
Masato Fujihara
President & CEO
