The Fair Labor Standards Act (FLSA) requires that executive, administrative and professional positions meet a salary threshold (in addition to duties tests), to be considered exempt from the minimum wage and overtime requirements of the FLSA. Highly compensated employees are exempt if they meet a salary threshold, regardless of their duties.
In 2023, the United States Department of Labor proposed increases to these salary thresholds. The proposed rule was open for public comment until November 7, 2023. Since then, the Department has been reviewing those comments and preparing a final rule. The final rule is expected in April, 2024.
The current salary threshold for exempt status for executive, administrative, and professional (EAP) positions is $684 per week (the equivalent of $35,568 annually for a full-year employee) paid on a salary basis. The proposed rule would increase the threshold more than 50%, to $1,059 per week ($55,068 annualized) and would impose automatic updates every three years. The threshold in the final rule may be higher than in the proposed rule, because the Department has indicated that the threshold in the final rule will be keyed to the 35th percentile of earnings of full-time salaried workers in the lowest-wage census region in the United States, using earnings data as of the date that the final rule takes effect. The rule also is expected to provide for increases every three years based on increases in earnings data.
The current salary threshold for highly compensated (HC) positions is $107,432 per year, with at least $684 paid per week on a salary or fee basis. The proposed rule would increase this threshold to $143,988 per year with at least $1,059 paid per week on a salary or fee basis. The threshold for HC positions threshold in the final rule is likely to be higher, as it is expected to be keyed to the 85th percentile of earnings of full-time salaried workers in the lowest-wage census area. This threshold also is likely to be subject to increases every three years based on increases in earnings data.
With these changes afoot, this is a good time to review the FLSA exempt/non-exempt status of all positions based on salary thresholds and duties tests as applicable, and adjust accordingly. We can help.
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