Upcoming Changes to FLSA Exemptions: What Employers Need to Know

August 14th, 2024

Upcoming Changes to FLSA Exemptions: What Employers Need to Know

Effective July 1, 2024, changes to the Fair Labor Standards Act (FLSA) will alter the salary thresholds required for certain employees to qualify for exemptions from minimum wage and overtime rules. This adjustment is part of the Department of Labor's ongoing efforts to ensure fair compensation practices and to keep pace with economic changes.

Key Changes Effective July 1, 2024

The most immediate change is the increase in the exempt salary threshold. Beginning July 1, 2024, employers must pay a minimum of $844 per week, equivalent to $43,888 annually, to classify employees as exempt under the administrative, executive, or professional categories. Employees earning less than this amount will no longer qualify for these exemptions and will be eligible for overtime pay for any hours worked beyond the standard 40-hour workweek.

This adjustment is particularly impactful for businesses that have relied on the lower thresholds to manage payroll costs. Employers will need to evaluate their current workforce to determine which employees will be affected and either adjust salaries accordingly or reclassify employees as non-exempt, ensuring they receive the overtime compensation they are entitled to under the law.

Further Changes Coming January 1, 2025

The changes do not stop there. On January 1, 2025, the exempt salary threshold will increase again, this time to $1,128 per week, or $58,656 annually. This continued increase underscores the Department of Labor’s commitment to ensuring that salary thresholds for exempt status reflect the cost of living and economic conditions.

Additionally, there will be significant impacts on the exemption status of highly compensated employees (HCEs). For these employees, who do not meet all other elements of the traditional “white-collar” exemptions, the minimum salary rose to $132,964 on July 1, 2024, and will rise to $151,164 on January 1, 2025.

Looking Ahead: Automatic Adjustments

One of the most notable aspects of the new rule is the introduction of automatic increases to exempt salary thresholds. Beginning July 1, 2027, and continuing every three years thereafter, these thresholds will be adjusted based on updated earnings data. This ensures that salary requirements for exemptions will remain aligned with current economic conditions, reducing the need for periodic rule changes.

What Employers Should Do Now

To prepare for these changes, employers should conduct a comprehensive review of their employee classifications and payroll structures. Proactive planning will be crucial to ensure compliance with the new thresholds and to manage the financial implications of these changes. Additionally, clear communication with employees about their classification and compensation adjustments will be essential in navigating this transition smoothly.

In conclusion, the upcoming changes to the FLSA exemptions represent a significant shift in the landscape of wage and hour laws. Employers who stay informed and take timely action will be best positioned to adapt to these new requirements while maintaining compliance and supporting their workforce.

Keep an eye on our Events page, located at: https://www.wagnerlegalmn.com/events/ for free upcoming seminars about business owner updates.

If you’d like to meet with an attorney to explore ways to ensure compliance with business owner laws, contact us to get started.

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