The U.S. Department of Labor (DOL) has announced significant updates to the federal salary threshold for exempt employees. These changes will be implemented in two phases, taking effect on July 1, 2024, and January 1, 2025.
Increases
Effective July 1, 2024, the salary threshold for the “executive, administrative, or professional employee” exemption under the federal Fair Labor Standards Act (FLSA) will increase from $684 per week (equivalent to $35,568 annually) to $844 per week (equivalent to $43,888 annually). Employees earning below this threshold will no longer qualify as exempt from the FLSA’s minimum wage and overtime pay requirements. A subsequent increase will occur on January 1, 2025, raising the salary threshold to $1,128 per week (equivalent to $58,656 annually).
In addition, effective the same date, the federal annual salary threshold for the "highly compensated employee" exemption will increase from $107,432 to $132,964 annually. This threshold will further increase to $151,164 annually on January 1, 2025.
The DOL has committed to updating these thresholds every three years, with the next adjustment scheduled for July 1, 2027.
Next Steps
Employers should evaluate current salaries of exempt employees to identify those affected by the new threshold, consider state-specific requirements that may exceed the federal thresholds (particularly in states such as New York and California), develop a plan to adjust salaries or reclassify employees as necessary, and ensure that payroll systems reflect the new salary threshold and classification.
These proactive steps will help employers maintain compliance with the updated FLSA requirements and ensure that employees are compensated appropriately.