The Fair Labor Standards Act (FLSA) mandates that employers pay employees who are non-exempt overtime for hours worked in excess of 40 hours in a workweek. However, the FLSA provides an exemption to the requirement of overtime pay, for employees who meet certain salary and duty tests.

In order to be “exempt” from overtime pay, the employee must generally satisfy three tests:

Duties Test: The work duties must be considered executive, administrative, or professional.
Salary-Basis Test: The employee must be paid a fixed salary that cannot fluctuate with the quantity of work.
Salary-Level Test: If the employee meets the duties test, then he or she must be paid a minimum salary of $684 per week ($35,568 annually).

The exemption for “highly compensated employees” is $107,432 annually.

On August 30, 2023, the Department of Labor (DOL) released a proposed rule updating the salary threshold. Public comment closed in November 2023 and the proposed rule is expected to take effect in April 2024.

What is expected in 2024? The DOL’s proposed rule will increase the standard salary threshold from $684 per week to $1,059 per week ($55,068 annually). It will also increase the salary threshold for highly compensated employees from $107,432 to $143,988 annually.

The proposed rule further provides for automatic adjustments to the salary threshold every three years to reflect the current earnings data.

Employers must comply with the new salary thresholds rule if it goes into effect in April 2024. Employers should review their current exempt employees to determine if they are between the current and proposed salary thresholds because they may need to adjust the employees’ salaries to keep them exempt. However, merely adjusting the employee’s salary to meet the new threshold may not suffice because the employee must still meet the salary threshold and the duties test to qualify for an exemption from overtime requirements. We will monitor the status of the overtime rule and update this report as developments unfold.

Any information included here or through our website is presented solely for general informational purposes and is not in any way intended as legal advice, is not a substitute for getting actual legal advice from an attorney, and should not be acted upon as legal advice without first seeking qualified professional counsel specific to your needs and situation. Additionally, by providing this general information and the information on our website, no attorney-client relationship is created.

Department of Labor's Overtime Threshold Expected in April 2024

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