Here’s All You Need to Know About the Final White Collar Exemption Rule

On April 23^rd, 2024, the US Department of Labor (DOL) announced a finalized rule which will see the minimum compensation levels increasing for the ‘white collar’ exemptions to the federal Fair Labor Standards Act’s (FLSA) overtime premium pay requirements.

The rule will significantly increase the minimum salary threshold for those who work in an executive, professional, or administrative role (the so called ‘white collar’ exemptions). The threshold will increase across two dates; one on July 1^st, 2024, and the other will follow on January 1^st, 2025.

The current threshold for this exemption is $684 per week ($35,568 annually). This threshold will increase as follows:

• July 1^st, 2024, the threshold will rise to $844 per week ($43,888 annually).
• January 1^st, 2025, the threshold will rise to $1,128 per week ($58,656 annually).

In addition to this, this new rule also increases the minimum annualized salary threshold to qualify for the highly compensated employee (HCE) exemption. As it stands, the current threshold for HCE employees is $107,432 annually, but this will increase as follows:

• July 1^st, 2024, the threshold will rise to $132,964 annually.
• January 1^st, 2025, the threshold will rise to $151,164 annually.

Employees who meet the new minimum pay requirements must also meet all the other requirements of the FLSA exemptions in order to apply for one. For clarity, here are the criteria that need to be met alongside salary for each ‘white collar’ role:

Executive:

• The primary duties of the employee must relate to managing the business, or a department within the business.
• The employee must regularly manage at least two full-time employees, or the equivalent in part-time employees.
• The employee must have the authority to hire or fire employees, or the employee’s recommendations on hiring, firing, and promotions must carry significant weight.

Professional:

• The employee’s primary duties must relate to work that is largely intellectual and involves the regular use of “discretion and independent judgment” (defined by the DOL).
• The employee must work in a field of science or learning.
• The employee must have acquired his or her knowledge through a prolonged course of specialized intellectual instruction.

Administrative:

• The employee’s primary duties must be the performance of office or nonmanual work directly related to the management or general business operations of the company (or the general business operations of the company’s clients).
• The employee must regularly exercise discretion and independent judgment on important matters.

It is important for employers to be aware of these changes so to ensure that the employees who they are enrolling for exemption are still applicable against these new monetary criteria. This will either mean raising salaries to meet these new threshold increases, or formally reclassifying currently exempt employees and making them aware of their eligibility for overtime.

If you would like to discuss how we can help assist you with auditing your current payroll in anticipation of this change, as well as overseeing the management of this change, please get in touch with us.