A Department of Labor (DOL) proposed rule increasing the minimum salary threshold for exempt employees is projected to change the exempt status of approximately 3.4 million employees and go into effect as early as June 2024.

The proposed rule will increase the standard salary level to the 35th percentile of weekly earnings of full-time salaried workers. Specifically, the proposed rule would guarantee overtime pay for most salaried workers in all states and territories earning less than $55,000 annually (or $1,059 per week). This is a significant increase from the current rule, which guarantees overtime pay for most salaried workers earning less than $35,568 annually (or $684 weekly). The proposed rule also increases the minimum salary for application of the highly compensated employee exemption from $107,432 to $143,988, which is equivalent to the 85th percentile of earnings for full-time salaried workers nationally. Additionally, the proposed rule includes a mechanism for automatically updating the salary earnings threshold every three years.   

Employers of overtime-exempt employees who make less than the new minimum salary threshold will need to either re-classify their employees or adjust salaries to meet the new threshold. Employers should also continue to ensure that exempt employees are paid on a salary basis and are primarily involved in the performance of exempt job duties defined by the DOL’s regulations, as the salary threshold remains one of several requirements for exempt classification. The DOL plans to finalize the rule by April 2024, meaning the new rule could take effect as soon as June 2024. Accordingly, employers should prepare to respond to the increased minimum threshold for exempt employees. Also, employers in states with salary thresholds above the new projected level must continue to adhere to those minimum thresholds to comply with applicable state law.