US Department of Labor Salary Threshold Increase Two-Step

The US Department of Labor (DOL) announced today an anticipated final rule to increase the salary threshold for exempt employees.  The rule increases the salary threshold two times in the next 8 months from the current level of $35,568 annually ($684/wk).

The first increase, effective July 1, 2024, increases the threshold to an annual salary of $43,888 ($844/wk).  The second increase, effective January 1, 2025, increases the threshold again to an annual salary of $58,656 ($1,128/wk).  In addition to these two step increases, the rule has a provision for automatic increases every three years based upon employee earnings data. 

As a reminder, in order to be exempt under the FLSA, an employee needs to meet both the salary basis and duties test (except for some classifications like outside sales, attorneys, and medical doctors, all of whom have no salary threshold requirement).

As happened when the DOL attempted to increase the salary threshold under the Obama administration to $47,476 annually, employers can expect that this rule will be challenged in court.  The Obama-era rule was overturned by the court and was replaced by the current level during the Trump administration. It will be interesting what happens in court, as the first step on July 1 uses the same statistical reasoning that was the underpinning of the Trump administration’s increase. 

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