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21 June 2024

US Department of Labor raises standard salary level for certain employees exempt from overtime pay starting July 1, 2024

For information purposes only. Employers should consider seeking the assistance of experienced employment law attorneys before implementing policy changes.

In a revised rule governing overtime pay exemptions for executive, administrative and professional employees, the US Department of Labor (DOL) has increased the standard salary level and the highly-compensated employee total compensation threshold (the alternative test).

These increases will initially occur in two phases with the first effective July 1, 2024, and second effective January 1, 2025.  Future updates will occur every three years to reflect current earnings data.

Under the Fair Labor Standards Act (FLSA), employers generally must pay their employees overtime of at least 1.5 times their employees’ regular rate of pay when they work more than 40 hours in a workweek.

The FLSA exempts employees from the overtime pay requirement if they:

  • Are paid a predetermined and fixed amount (salary) that is not subject to reduction because of variations in the quality or quantity of work performed
  • Are paid at least a specified weekly salary level (through June 30, 2024, $684)
  • Primarily perform executive, administrative or professional duties, as set forth in 29 CFR part 541

Highly-compensated employees may be exempt from the overtime pay requirement if they: (1) are paid a salary, (2) earn above a higher-total-compensation level (through June 30, 2024, $107,432) and (3) satisfy a minimum duties test. 

Salary thresholds for executive, administrative or professional employees starting July 1, 2024

Effective Date

Standard salary level

Highly-compensated employee total annual compensation threshold

Before July 1, 2024

$684 per week (equivalent to $35,568 per year)

$107,432 per year, including at least $684 per week paid on a salary or fee basis

July 1, 2024

$844 per week (equivalent to $43,888 per year)

$132,964 per year, including at least $844 per week paid on a salary or fee basis

January 1, 2025

$1,128 per week (equivalent to $58,656 per year)

$151,164 per year, including at least $1,128 per week paid on a salary or fee basis

July 1, 2027, and every three years thereafter

To be determined by applying to available data the methodology
used to set the salary level in effect at the time of the update

To be determined by applying to available data the methodology used to set the salary level in effect at the time of the update

Ernst & Young LLP insights

The DOL’s move to raise the salary basis for exempt status under the FLSA is facing legal challenge in cases currently pending in the U.S. District Court for the Eastern District of Texas.

Because the DOL’s implementation of this new rule could face legal delays, and given the complex nature of properly identifying employees potentially exempt from the federal overtime pay requirements, employers should consider seeking the assistance of experienced employment law attorneys before implementing policy changes.

Ernst & Young LLP (US) does not practice law or offer legal advice.

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Contact Information

For additional information concerning this Alert, please contact:

Workforce Tax Services - Employment Tax Advisory Services

Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor

Document ID: 2024-1240

 

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