CHANGE TO EXEMPT EMPLOYEE SALARY REQUIREMENTS EFFECTIVE JULY 1, 2024

On April 23, 2024, the Biden-Harris administration announced the finalization of a rule that will raise the salary threshold for overtime-exempt, salaried workers. Under the new rule, the annual salary threshold required to exempt a salaried worker from federal overtime pay requirements will increase from $35,568 to the equivalent of an annual salary of $43,888, effective July 1, 2024. An additional increase, to $58,656, will take effect on January 1, 2025, and additional increases will occur at least every three years.

These increases primarily affect employees classified as exempt under the administrative, executive and professional exemptions.

Prior to the effective dates, employers must ensure all exempt employees still fit both the duties test for the executive, administrative or professional exemptions and also fit within the updated salary threshold. If the exempt employee’s annual salary is less than the new threshold amount, the employee must be re-classified to nonexempt status and the employee will be eligible for overtime (time-and-a-half) pay when they work more than 40 hours in a work week. Alternatively, the employer will need to adjust the employee’s annual salary upward to fit within the threshold to maintain the employee’s exempt status.

While there may be legal challenges to this new rule that could delay or prohibit its implementation, at this time Employers need to be prepared for this new rule to take effect on July 1, 2024.

Employers should immediately review their exempt positions and make decisions regarding these options prior to July 1, 2024 and, assuming there is no delay in implementation, notify employees in writing, prior to July 1, 2024 of their reclassification to nonexempt status or their increase in salary.

If you have questions about this new rule or any other employment law related questions, please contact one of the Blethen Berens employment law attorneys.

Additionally, Blethen Berens and Abdo Workforce Solutions will be presenting a webinar on the new salary threshold and mastering Minnesota’s new employment leave laws on May 15, 2024 from 11:00 a.m. to 12:00 p.m. The registration link and more information can be found here.