06/07/2024
Buckle up, things are changing.
Under a new Department of Labor rule, effective July 1, 2024, the minimum salary that must be paid to most exempt, salaried employees will increase from the current minimum of $35,568 per year ($684/week) to $43,888 ($844/week). It will increase further to $58,656 ($1,128/week) on January 1, 2025.
Will the July 1, 2024 deadline actually matter?
We don’t know yet. The new rule will almost certainly get challenged in court, because this is America! But for now, we should operate under the assumption that the rule will go into effect on July 1, 2024 as planned. I would hesitate to announce any changes until we get a little closer, but employers should start looking at their 2024 budgets and figure out how this might affect them if it does go into effect.
Does this affect me or my business?
Maybe. We’ll start from the beginning.
The Fair Labor Standards Act is a federal law that requires, among other things, overtime pay. There are exceptions to it, called “exemptions”, and all employees fall in one of two categories, either “exempt” and “non-exempt.”
Non-Exempt: Many employees, mostly in “blue collar” jobs, are “non-exempt” — this means that if they work overtime, the employer has to pay them overtime pay. The new rule does not affect this group.
Exempt: Some employees, mostly in “white collar” jobs, are “exempt” — this means if they work overtime, the employer does not have to pay them overtime pay. All employees are “non-exempt” by default, and can only be considered “exempt” if they meet the specific requirements of a specific exemption.
The rule change affects only the second group – exempt employees — and it only affects most, not all, of those. Unfortunately, there are dozens and dozens of exemptions to the Fair Labor Standards Act.
The most common exemptions, by far, are the Executive Exemption, the Administrative Exemption, and the Professional Exemption. If you or your employees are exempt, there’s as good chance it is under one of these three exemptions. The new rule affects these exemptions.
These exemptions all have a salary minimum. In order to qualify for the exemption (and be disqualified to receive overtime pay), you have to (1) pay them a salary that does not go down, even if their hours go down, and (2) make sure that salary is at least $684 per week. This is what is changing — the minimum salary will rise to $844/week in July, 2024 and then to $1,128/week in 2025. If this minimum is not met, the employee is no longer exempt.
What needs to happen with these employees?
There are two options:
- They must get a raise, OR
- They get re-classified as non-exempt, and they must receive overtime pay if they work more than 40 hours in a week
What about other exempt employees?
Some of the most common professions that are exempt but are not affected by the rule change are teachers, farm workers, truck drivers, and outside salespeople. The new regulation does not apply to most of them. But some of these professions have other weird little rules that apply to them. If you don’t have a good handle on which exemption applies to you or your employees, or what the rules are for that exemption, you might want to give us a call.
I still have questions…
Of course you do! This stuff is confusing and convoluted. The number of employees and employers with overtime and minimum wage issues is truly shocking, and many employers do not even know that they are doing it wrong. Luckily, we have answers! Whether you are an employee who thinks something is fishy with the way your boss is doing it, or an employer who just wants to stay out of trouble, we are here for you.
J. KEMP BRINSON | ATTORNEY