On July 1, 2024, the Department of Labor’s (“DOL”) final rule increasing the salary level threshold for certain exempt employees went into effect (with one limited exception). This means that employees who, before July 1, were previously classified as exempt executive, administrative, or professional (commonly known as “EAP” or “white collar”) employees under the Fair Labor Standards Act must now be paid at least $844 per week ($43,888 annually) on a salary basis to satisfy the exemption. Similarly, exempt Highly Compensated Employees (“HCE”) must now make $132,964 per year as of July 1, 2024.

As Godfrey & Kahn previously reported, pursuant to the DOL’s rule, the salary level threshold is set to increase automatically in a mere six months, on January 1, 2025. At that time, EAP employees must be paid at least $58,656 per year ($1,128 per week), whereas HCEs must be paid a minimum of $151,164. According to the rule, salary levels jump again (to an undetermined amount) on July 1, 2027, for both EAP employees and HCEs and are set to automatically increase every three years thereafter. 

As predicted, employers have challenged the rule, as well as the DOL’s authority to promulgate it. Although the U.S. District Court for the Eastern District of Texas issued a very limited order preliminarily enjoining the rule only as to the State of Texas as an employer, no court has enjoined it as to private and other public employers.

While the rule could be enjoined in the future, it is nevertheless in effect at this time and employers should take steps to comply. If you have any questions about how to comply with the rule, as well as how to mitigate risk of misclassification and overtime claims, contact a member of our team.