On April 23, 2024, the U.S. Department of Labor issued a final rule updating the federal exemptions from minimum wage and overtime pay requirements for executive, administrative, and professional employees, which will partially take effect on July 1, 2024, and January 1, 2025.

The first portion of the final rule takes effect July 1, 2024, and increases the standard salary level for the overtime exemption and adjusts the highly compensated employee total annual compensation threshold. The second portion of the final rule takes effect on January 1, 2025.

Under the final rule, the standard salary level for the overtime exemption for executive, administrative, and professional employees increases from $684 per week to $844 per week, which is the equivalent of an annual salary of $43,888, effective July 1, 2024. It further increases to $1,128 per week, effective January 1, 2025, which is the equivalent of an annual salary of $58,656.

The final rule also increases the earnings threshold for the highly compensated employee exemption in two phases. Effective July 1, 2024, the total annual compensation requirement for highly compensated employees will be $132,964. Effective January 1, 2025, the annual compensation requirement will increase to $151,164.

It is highly likely that once the final rule is formally published, it will face legal challenges. Despite any legal challenges the final rule may face, employers should still understand the impacts of the final rule and be prepared for the rule to potentially take effect in July 2024. Contact your business attorney with Shinners & Cook, P.C. today to learn how to comply with the U.S. Department of Labor’s new overtime exemption regulations.