Employment Law Blog

TWO Threshold Hikes for the Price of One: DOL Issues Final Overtime Salary Threshold Rule

As tipped in September of 2023, the Wage and Hour Division of the Department of Labor (“DOL”) has finally released the Final Rule for raising the minimum salary threshold for employers eligible for exemption from overtime pay. While the new rule isn’t vastly different from the proposed rule, there are still enough substantive changes for employers to pay close attention.

The Good

The proposed rule came with a jump to a threshold of $1059 per week all at once, which would have been quite a shock for employers long compliant with a threshold of $684 per week, or $35,568 a year.  The Final Rule eases the pain slightly – the first threshold increase on July 1, 2024, will only rise to $844 per week, or $43,888 per year, so that employers won’t take quite as strong of a hit as contemplated initially…

The Bad

…which will be cold comfort just six months later on January 1^st, 2025, when the threshold rises ABOVE the proposed rule’s figure to an even higher threshold of $1,128 per week, or $58,656 per year.

The threshold for highly-compensated employees in the Final Rule does something similar – as proposed, it would have jumped from $107,432 per year to $143, 988, but now sees a smaller initial increase to $132,964 in July before jumping to $151,164 in January.

The Ugly

It has been proposed before, but the new Final Rule comes with an automatic adjustment mechanism to recalibrate the salary threshold every three years, starting July 1, 2027. Employers might have to get used to revisiting their employee rosters every three years as the threshold begins moving on a recurring basis.

The Takeaway

The last time a similar hike in the threshold was finalized, the rule was stayed by a court before taking effect and ultimately pulled by a new administration. Still, employers should operate on the assumption that are not one, but two, overtime salary threshold hikes coming within a few short months and begin planning accordingly. It’s important to note the Final Rule still does not change the other half of the analysis for overtime exemption: whether employees meet certain duties tests. Employers must understand that it isn’t quite as simple as whether or not a given employee earns above a threshold – the duties test still requires them to perform certain roles to qualify for exemptions.

With impending overtime salary threshold hikes on the very near horizon, the time to prepare is now – conduct a salary/duties audit of every employee, especially those currently exempt from the overtime requirement. For assistance with employee audits or any concerns with the new Final Rule and compliance, contact your McBrayer attorney today.

Cynthia L. Effinger, Member with McBrayer, is located in the firm’s Louisville office. Ms. Effinger’s practice is concentrated in the areas of employment law and commercial litigation. Her employment law practice is focused on drafting employment manuals and policies, social media, wage and hour, non-compete agreements and workplace discrimination. Ms. Effinger can be reached at ceffinger@mcbrayerfirm.com or (502) 327-5400, ext. 2316

Claire M. Vujanovic, Member with McBrayer, is located in the firm's Louisville office.  Ms. Vujanovic's practice is concentrated in the areas of labor and employment law and includes NLRA compliance, drafting and reviewing employment manuals and policies, drafting severance, non-compete and employment agreements, and counseling clients related to overtime and wage and hour regulations, laws and claims and workplace discrimination.  Ms. Vujanovic can be reached at cvujanovic@mcbrayerfirm.com or (502) 327-5400, ext. 2322.  

This article does not constitute legal advice.