The Department of Labor today issued a final rule that would significantly increase the number of employees who are subject to the Fair Labor Standards Act’s overtime and minimum wage requirements. The rule was issued despite warnings from the American Bankers Association and other industry groups that increasing the salary threshold would harm employees by limiting remote and flexible scheduling options, limit career advancement, and reduce access to incentive pay and other benefits. Employer organizations representing nonfinancial companies are considering filing a lawsuit to challenge the rule.
Under the rule, the standard salary level is set at the 35th percentile of weekly earnings of full-time salaried workers in the lowest-wage Census Bureau region, which is a significant increase above the existing salary level of $35,568. The salary level under the rule will increase to $43,888 as of July 1, and then to $58,656 as of Jan. 1, 2025. An employee whose salary falls below the salary level is automatically classified as a nonexempt employee and is subject to federal overtime and minimum wage requirements. For employees whose salary falls above the salary level, the employee may qualify for exempt status if the employee’s responsibilities satisfy the “duties test,” which the final rule did not change.
The rule also requires DOL to update the salary level automatically every three years using the methodology in the rule. In addition, the rule increases, to $132,964 on July 1, the amount of income an employee must receive to be subject to the “highly compensated employee,” or HCE, test—an abbreviated duties test available to determine whether employees who meet a higher salary threshold are exempt. The HCE test’s compensation threshold then increases to $151,164 per year (including at least $1,128 paid on a salary or fee basis) as of Jan. 1, 2025.
