The Fair Labor Standards Act (FLSA) requires covered employers to pay employees a minimum wage and overtime pay of at least 1.5 times the regular rate for work exceeding 40 hours per week. Starting July 1, 2024, that salary threshold will increase from $35,568 to the equivalent of an annual salary of $43,888, or $844 per week. 

Section 13(a)(1) of the FLSA exempts employees in bona fide executive, administrative, or professional (EAP) roles from these requirements, known as the “white-collar” exemption. To qualify, employees must meet three criteria: 

• A predetermined salary not subject to reductions based on work quality or quantity (salary basis test)
• A salary meeting a minimum level (salary level test)
• Job duties involving executive, administrative, or professional tasks (duties test). Employers must prove exemption status, which cannot be determined solely by job titles or descriptions.

Starting January 1, 2025, the Department of Labor (DOL) will implement a new methodology for calculating wage thresholds, departing from the approach used for the past few decades. This significant shift means that individuals earning less than $1,128 per week (annualized to $58,656) will be classified as non-exempt. Additionally, this threshold may rise further due to factors like inflation. 

Companies should consider doing the following before July 1, 2024: 

• Review current employees who are classified as exempt and determine if the change will impact any of them.
• Ensure your payroll department and systems are prepared for any necessary adjustment for employees who are currently exempt but will become non-exempt on July 1.
• Communicate any changes to salary, shifts, etc. to impacted employees in advance of the change.
• In addition to the upcoming federal changes under the FLSA, it’s crucial to check for any local or state-specific regulations that might differ from federal guidelines.