Recent and future changes to the federal Fair Labor Standards Act (FLSA) mandate the minimum salary most employers must pay exempt status employees. Under the FLSA, employees are classified as either exempt or non-exempt. Exempt means employees are not subject to federal overtime laws. Non-exempt means employees are subject to federal overtime and minimum wage laws.
Exempt Employees
Executive, Administrative and Professional
Starting July 1, 2024, exempt employees who are classified as executive, administrative or professional must be paid at least $43,888 per year. In addition, they must continue to meet other criteria
- Being paid on a salary basis (receiving a pre-determined, fixed salary); and
- The job duties test.
Starting January 1, 2025, this same group of employees must be paid at least $58,656 per year. After that, there are automatic increase to the salary threshold every three years.
Exempt Employees
Outside Sales, Computer-Related Occupations, Highly Compensated Employees
Employees who work in outside sales, computer-related occupations, or who are highly compensated have different minimum salary requirements for exempt employees.
Non-profit Organizations
Under the FLSA, some non-profit organizations are exempt from this law if they meet certain criteria that are detailed in Fact Sheet #14 Non-profit Organizations and the FLSA. In most cases, non-profit organizations are obligated to follow state laws on overtime and other wage & hour requirements.
Complying with the New Rule
If exempt employees currently make less than the newly required minimum salary, employers have two options:
- Increase the employee’s salary to at least the required minimum; or
- Change the employee’s status to non-exempt
When changing employees to a non-exempt status, keep in mind that non-exempt employees:
- Are eligible for overtime pay.
- Can be paid on an hourly or salaried basis. If they are paid on a salaried basis, they are still eligible for overtime pay.
- Must track hours worked and other paid time.
- Are eligible for rest and meal breaks in accordance with state laws.
- Any other laws related to non-exempt employees apply.
State Laws
A few states, such as California, Washington and New York, have overtime exemption criteria that conflict with the FLSA. Employers should check applicable state laws to ensure compliance with both federal and state laws.
Assistance with the New Overtime Overtime Rule
Employers should review and update their human resources policies and practices to reflect this new rule. LJ Consulting can provide expert guidance on this rule. In addition, if you need a new employee handbook or need to update your current one, they can create a compliant and well-written employee handbook.