Content in this post is not to be considered as legal advice.
This blog was written by Jodie Roy, SHRM-CP, Director of People Operations at Club Capital.
"I am an experienced Human Resource and People Operations leader with over 10 years of national and global experience, specializing in HR operations, compliance and talent management. Successfully leading HR teams and organizations from start-ups to 30,000+ employees."
Last updated 11.19.2024
On Friday, November 15, 2024 the US District Court in Texas vacated the 2024 DOL ruling for the FLSA minimum wages, ruling that the Department of Labor overstepped its authority. This means that employers do not have to increase the salaries for their exempt employees to maintain exempt status, the duties test still applies for exempt positions and the minimum salary requirement is $35,568 annually. This ruling is nationwide and also vacates the July 1, 2024 increase as well.
The Department of Labor has not updated their website as of Monday November 18, 2024.
Read more...
The US District Court in Texas Ruling.
"The court concluded that the 2024 rule was not based on a permissible construction. Like the 2016 rule’s attempt to dramatically increase the minimum salary level from the 20th to the 40th percentile of full-time, salaried workers in the South, the 2024 rule mandated raising the minimum salary level for white-collar exemptions from the 20th to the 35th percentile—$58,656 annually—on Jan. 1, 2025." (Shrm.org accessed 11.19.2024)
"It is clear now that the January 1, 2025 increase will not go into effect as scheduled, and as a matter of law, the July 1, 2024 increase is nullified. Employers that previously adjusted the salaries or exemption status of employees who earned less than the salary threshold set by the now-invalidated July 1 increase are advised to consult with counsel before considering whether to rescind those changes on a going-forward basis. Employers should also remain aware that some states have salary thresholds that exceed the FLSA threshold, including Alaska, California, Colorado, Maine, New York, and Washington.
The DOL may seek to appeal the lower court’s decision to the Fifth Circuit Court of Appeals. That said, with the upcoming change in presidential administration, we predict that under new leadership the DOL would likely abandon any appeal and allow the lower court’s decision to stand. Going forward, it is less clear whether the Trump administration will revisit some or all of the rule, repealing it entirely, or perhaps adopting a different formulation. In any event, Littler’s Workplace Policy Institute will keep readers apprised of current developments." (Littler.com, accessed 11.19.2024)
TLDR: Here's a Quick Summary
The US Department of Labor (DOL) recently updated the minimum Fair Labor Standards Act (FLSA) wage requirement for exempt employees.
- These rulings by the DOL impact your agency if:
- You have employees who is paid an annual salary and currently make less than $58,656.00
- Your employee does not track hours worked and is not paid overtime while earning less than $58,656.00
- You have sales professionals with commission based salaries and are not qualified as exempt outside sales professionals making less than $58,656.00.
Join us for a live training and Q&A on November 13th, 2024 at 1 PM EST. Click here to register free.
.jpg?width=1920&height=1080&name=FSLA%202025%20Wage%20Requirements%20Blog%20(1).jpg)
New Salary Requirements from the U.S. Department of Labor in 2025
Does your compensation structure meet the Department of Labor - FLSA Wage Requirements? Budgeting season is just around the corner, have you considered employee salary requirements in your FY 2025 budget.
Do you have exempt salaried employees making less than $58,656.00 annual base salary?
On July 1, 2024 the U.S Department of Labor (DOL) increased the minimum salary threshold to $43,888.00 for exempt salaried employees. This rate will increase again on Jan 1, 2024 to $58,656.00 and then every three (3) years starting July 1, 2027.
What does this mean for you and your small business?
First, It is important to understand the meaning of exempt and nonexempt employees.
- Exempt Employees usually hold administrative, professional or executive positions. They are exempt from the Fair Labor Standards Act’s (FLSA) overtime regulations and are not entitled to overtime pay. To be considered exempt an employee must meet certain criteria.
- Nonexempt Employees usually hold more manual or technical positions and are paid an hourly wage. Non Exempt employees are typically paid hours and are entitled to certain protections under the Fair Labor Standards Act (FLSA).
How Does The 2025 FLSA Wage Requirement Apply To My Business?
With that being said, as a small business you must evaluate the roles and responsibilities for employees to ensure that you have:
- Classified your employees correctly as exempt or nonexempt
- Ensure that the current hourly wage or annual salary meets or exceeds the minimum wage requirements under federal law or state and local laws (whichever is higher).
In order for an employee to qualify for exempt status they must meet the following criteria on or before Jan 1, 2025:
- Their annual salary must be at least $58,656.00 (federal). States like California and New York have rates that exceed the federal minimum.
- Their duties must align with the position held as an: executive, administrative, professional, or outside sales (see definition below).
To qualify for an outside sales exemption an employee must meet all of the following:
- The employee’s primary duty must be making sales (as defined in the FLSA), or obtaining orders or contracts for goods and/or services for which a consideration will be paid by the client or customer; and
- The employee must customarily and regularly engage in sales activities away from the employer’s business location (office) or home office for remote/hybrid employees. Outside sales does not include sales made by mail, telephone or the Internet unless such contact is used merely as an adjunct to personal calls.
.jpg?width=1920&height=1080&name=FSLA%202025%20Wage%20Requirements%20Blog%20(2).jpg)
What Are My Options As a Business Owner?
Understanding these new requirements is a great first step. Now, it’s time to take action while preparing your 2025 budget to ensure your business is in compliance with the US DOL. Here are a few ways you can do so…
- Increase the salary of exempt employees to at least $58,565.00 annually. The annual salary minimum is the base salary. An employer may use non discretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the standard salary test requirement.
- Transition the employee to an hourly wage and track all hours worked, the employee becomes a nonexempt employee and is eligible for overtime pay for any hours worked over 40 hours per week.
Please make sure to check state and local laws to ensure your are in compliance. Still unsure or have questions? Please feel free to reach out to your Client Advisor to schedule a call with our People Advisory team.
Article Resources:
