On April 23, 2024, the Department of Labor (DOL) released a final overtime rule defining the exemptions for executive, administrative, and professional employees. The rule introduces revised salary thresholds for overtime exemptions.
Revised Salary Thresholds and Effective Dates
- Effective July 1, 2024, executive, administrative, or professional employees must earn a minimum of $844 per week, which is a salary of $43,888 per year to qualify as exempt. The final rule will raise the annual compensation threshold for highly compensated employees to $132,964.
- Effective January 1, 2025, executive, administrative, or professional employees must earn a minimum of $1,128 per week, which is a salary of $58,656 per year. Additionally, it will further increase the annual compensation threshold for highly compensated employees to $151,164.
- Starting July 1, 2027, the rule initiates a triennial automatic update to the salary thresholds, to synchronize with changes in worker salaries and provide employers with a predictable schedule for forthcoming adjustments.
These figures are higher than previously proposed in the August 2023 rule and mark a significant jump from the current threshold of $35,568 for executive, administrative, and professional employees and $107,432 for highly compensated employees. Due to the significant increases and potential impact, it has prompted attention from employers across industries.
New York Salary Rate Increases
It is important to note that thresholds may vary from state to state. For example, the NYDOL has set yearly increases to employees who work in an “executive, administrative, or professional capacity” for the next three years starting in 2024:
New York City and remainder of “downstate” (Nassau, Suffolk, and Westchester Counties)
- $1,200 per week ($62,400 per year) on January 1, 2024
- $1,237.50 per week ($64,350 per year) on January 1, 2025
- $1,275 per week ($66,300 per year) on January 1, 2026.
Remainder of state (outside of New York City, Nassau, Suffolk, and Westchester Counties)
- $1,124.20 per week ($58,458.40 per year) on January 1, 2024
- $1,161.65 per week ($60,405.80 per year) on January 1, 2025
- $1,199.10 per week ($62,353.20 per year) on January 1, 2026.
California Salary Rate Increases
Moreover, starting from January 1, 2024, in California, an overtime-exempt employee must earn an annual salary of at least $66,560 to satisfy the threshold requirement.
The Next Step for Employers
It is crucial for employers to prepare for the final rule. If the rule is implemented, employers will have to increase the salaries of those employees or change their classification to be eligible for overtime. Therefore, to navigate these changes effectively, we recommend that employers review their exempt workforce, understanding roles, locations, functions, and salaries. This insight will enable strategic planning to prioritize roles affected by the new rule.
Employers can partner with our attorneys at Halpern & Scrom to assess their salaries and policies for compliance with the new rule. Before taking any action, it is crucial for employers to seek advice from experienced counsel, given the complexity involved in potentially raising salaries or reclassifying exempt employees. Additionally, employers can explore workforce adjustments, training, and communication strategies to effectively navigate the evolving landscape. Business groups have recently brought lawsuits challenging the new overtime rule. While these lawsuits are in their initial proceedings, Halpern & Scrom will monitor their progress to inform readers of any essential changes to the new rule.
DOL Resources
- Chart Regarding Earnings Thresholds for the Executive, Administrative, and Professional
- DOL – Final Rule
NYDOL Resource
California Department of Industrial Relations Resource Groups
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