Department of Labor Updates Salaries for Overtime-Exempt Employees

The U.S. Department of Labor has announced a significant update to the salary thresholds for overtime-exempt employees. For the first time in many years, the minimum salary levels will increase. Starting in July, the minimum salary for overtime-exempt employees will rise from $684 per week to $844 per week. This threshold will increase again in January 2025, reaching $1,128 per week.

What Does This Mean for Employers?

If your salaried, overtime-exempt employees are earning less than the new thresholds, you'll need to raise their salaries to comply with the updated regulations.

What If Employers Don't Want to Increase Salaries?

If you prefer not to raise salaries, you must reclassify these employees as hourly workers, making them eligible for overtime pay. Overtime pay is calculated at 1.5 times the regular hourly rate. Many employers avoid this to reduce costs and administrative burdens, such as implementing timekeeping systems.

Determining Employee Classification: Salaried vs. Hourly

The Department of Labor has established specific criteria to determine if an employee qualifies as overtime-exempt (salaried) or must be paid hourly. Here’s a breakdown of the qualifications for various exemptions:

Executive Employee Exemption

To qualify for the executive employee exemption, all of the following criteria must be met:

• The employee must earn a salary of at least $684 per week.
• Their primary duty must involve managing the enterprise or a recognized department/subdivision.
• They must regularly direct the work of at least two full-time employees or their equivalent.
• They must have authority over hiring or firing decisions, or their recommendations on these matters must carry significant weight.

Administrative Employee Exemption

To qualify for the administrative employee exemption, the following conditions apply:

• The employee must earn a salary of at least $684 per week.
• Their primary duty must involve office or non-manual work related to management or business operations.
• They must exercise discretion and independent judgment on significant matters.

Learned Professional Employee Exemption

The learned professional employee exemption requires:

• A salary of at least $684 per week.
• Primary duties that involve advanced knowledge in a field of science or learning, typically acquired through prolonged specialized instruction.
• Work that is predominantly intellectual and requires discretion and judgment.

Creative Professional Employee Exemption

To qualify for this exemption, employees must:

• Earn a salary of at least $684 per week.
• Primarily engage in work requiring invention, imagination, originality, or talent in an artistic or creative field.

Computer Employee Exemption

For computer employees, the criteria include:

• A salary of at least $684 per week or an hourly rate of at least $27.63.
• Employment in roles such as computer systems analyst, programmer, software engineer, or similar.
• Primary duties involving systems analysis, design, development, testing, or modification of computer systems or programs.

Outside Sales Employee Exemption

To be exempt as an outside sales employee:

• The primary duty must be making sales or obtaining orders/contracts for services or facilities.
• The employee must regularly work away from the employer’s business premises.

Understanding these criteria is crucial for ensuring compliance with the Department of Labor's updated regulations and avoiding potential legal and financial penalties. Make sure to review your employees' classifications and adjust their salaries or statuses as needed to align with the new requirements.

*(Qualifications quoted from the Department of Labor Website) Fact Sheet #17A: Exemption for

Executive, Administrative, Professional, Computer & Outside Sales Employees Under the Fair Labor Standards Act (FLSA) | U.S. Department of Labor (dol.gov)