The DOL released its updated federal overtime rule on April 23, 2024. With limited exceptions, the rule increases the minimum salary for exemption as executive, administrative, or professional (“EAP”) employee from $684 per week ($35,568 annualized) to $844 per week ($43,888 annualized) effective July 1, 2024 and to $1,128 per week ($58,656 annualized) effective January 1, 2025. The rule increases the minimum total annual compensation level for exemption as a “highly compensated employee”—e.g., one who customarily and regularly performs any one or more of the exempt duties or responsibilities of an EAP employee—from $107,432 to $132,964 effective July 1, 2024 and to $151,164 effective January 1, 2025.

Beginning July 1, 2027, and every three years thereafter, the DOL will implement further increases in the minimum salary for exemption as an EAP employee and the minimum annual compensation level for exemption as a highly compensated employee, tied to current earnings data.

There are no changes to the salary minimum exceptions for teachers, academic administrative employees, lawyers, and physicians, or to the alternative method of paying computer employees on a minimum hourly basis.

Other than in states with already-higher minimum salaries for exemption (which include California and, for certain types of employees, New York)–and absent a successful legal challenge to the new rule–employers should begin to prepare for the changes coming July 1, including by:

• Determining which employees will be impacted by the new thresholds.
• Considering whether you will increase their salaries to the new minimum or reclassify them to overtime-eligible.
• If you raise salaries to the new minimum, considering whether you might still have a “duties test” risk.
• If you reclassify certain employees to overtime-eligible, determining whether their supervisors are ready to manage the attendant overtime costs, understand what of hours are considered “hours worked” (e.g., certain travel time, time spent working from home or remotely, etc.), and understand what kinds of compensation are included in the regular rate for purposes of calculating overtime pay.

Proskauer’s Wage and Hour Group is comprised of seasoned litigators who regularly advise the world’s leading companies to help them avoid, minimize, and manage exposure to wage and hour-related risk.  Subscribe to our wage and hour blog to stay current on the latest developments.