The U.S. Department of Labor has issued a new overtime rule raising the minimum salary threshold for exempt employees.

Currently, to qualify for an exemption from overtime as an “executive,” “administrative” or “professional” employee, an employee must be paid on a salary basis and must earn at least $35,568 annually ($684 per week). Effective July 1, 2024, the annual salary threshold will increase to $43,888 ($844 per week). That threshold will increase again effective January 1, 2025, to $58,656 annually ($1,128 per week). The annual salary of employees who are treated as exempt and whose annual salary falls below the new minimums must be increased to the minimum salary level or the affected employees must be paid overtime for any hours they work over forty in a week.

The final rule also includes an automatic adjustment mechanism to review and update the minimum salary level every three years. The minimum salary for the highly compensated employee exemption was also increased from $107,432 to $151,164.

While litigation challenging the rule could delay its implementation, employers should review the salaries of those employees they treat as exempt from overtime to make sure that their annual salaries will meet the new, higher threshold and, if they do not, will need to decide whether to increase the employees’ annual salary or pay them overtime.

If you need assistance reviewing your pay practices or if you have any questions regarding this new rule, please contact Nancy Abrams at nabrams@sgrvlaw.com or Jennifer Myers Chalal at jmyers@sgrvlaw.com.