The United States Department of Labor (DOL) recently announced an increase in the minimum salary thresholds required to categorize employees as overtime exempt under the Fair Labor Standards Act (FLSA).
Under the FLSA, business owners must pay overtime compensation at one and one-half times the employee’s regular rate of pay for any hours worked over 40 hours in a workweek unless the employee falls into an overtime-exempt category. The three most common exempt categories are the so-called “white-collar” exemptions for executive, administrative, or professional employees. In addition to performing executive, administrative, or professional functions, to be exempt from overtime pay, these employees must be paid on a salary basis and meet a minimum salary threshold.
Beginning July 1, 2024, the minimum annual salary threshold for exempt employees will increase from $35,568 to $43,888. Then, on January 1, 2025, the annual salary threshold will increase to $58,656. Beginning July 1, 2027, the minimum required salary threshold will be updated every three years.
The FLSA’s amendment also affects the salary threshold for “highly compensated employees.” Currently. highly compensated salaried employees are exempt from overtime if they are paid a minimum annual salary of $107,432 and customarily and regularly perform at least one of the exempt duties or responsibilities of an executive, administrative or professional employee. On July 1, 2024, the salary threshold for “highly compensated employees” will increase to $132,964. The threshold will increase to $151,164 on January 1, 2025, and will be update every three years beginning July 1, 2027.
New Jersey employers should be aware that the State’s Wage and Hour Law (WHL) incorporates the FLSA executive, administrative, or professional employee exemptions by reference. The increase in the mandatory salary minimums for overtime exemption under the FLSA will also apply to overtime exemption under the WHL.
Employer organizations have already filed suit to block the salary threshold increases. The outcome of these challenges is uncertain, and there is no court order enjoining the FLSA from enforcing the increases. Employers must therefore assume that the increases will take effect and plan accordingly.
Determining who and who is not overtime-exempt under federal and state law raises tricky questions of fact and law. Mischaracterizing an employee as exempt is a costly mistake. Contact Trimboli & Prusinowski at 973-660-1095 to schedule a consultation.
