Federal: DOL Increases Exempt Employee Minimum Salaries 

The U.S. Department of Labor (DOL) has released its much-anticipated final rule, which will significantly increase the minimum salary requirements for many exempt employees. Published on April 26, 2024, this rule is set to impact businesses nationwide, making it essential for employers to understand the upcoming changes and take appropriate action. 

A Two-Stage Implementation

The DOL has outlined a two-step approach for implementing the new minimum salary levels: 

  • July 1, 2024: The initial salary increase takes effect. 
  • January 1, 2025: The second salary increase takes effect. 

Increased Minimums for EAP Employees

Under the new rule, the minimum salary for exempt executive, administrative, and professional (EAP) employees will be raised as follows: 

  • $844 per week ($43,888 annually) starting July 1, 2024 
  • $1,128 per week ($58,656 annually) starting January 1, 2025 

Exceptions to Keep in Mind

While the new minimum salary requirements apply to most EAP employees, there are a few notable exceptions: 
  • Teachers, as well as practicing doctors and lawyers, are exempt from these federal minimum salary requirements. However, they may still be subject to state-specific minimum salary levels. 
  • Academic administrative employees are subject to school-specific minimum salary requirements. 

As an employer, staying informed about these changes and ensuring your exempt employees are paid in compliance with the law is crucial. In the following section, we’ll explore how the new rule affects computer employees and highly compensated employees.

Computer Professionals: Two Compensation Options

If you have computer professionals on your payroll, it’s important to understand that under the new rule, you have two options for compensating these employees: 

  • Salary Basis: If you choose to pay your computer employees a salary, they will be considered part of the EAP group. This means they will need to meet the same minimum salary requirements we discussed earlier. 
  • Hourly Basis: Alternatively, you can pay your computer employees at least $27.63 per hour. This hourly rate remains unchanged under the new rule. 

Highly Compensated Employees (HCE): New Thresholds

The DOL’s final rule also introduces changes for employees who qualify for the HCE exemption. To maintain their exempt status moving forward, you will need to: 

  • Pay them a salary that meets the EAP minimum requirements mentioned earlier, and 
  • Ensure they earn a total annual compensation of at least:  
    • $132,964 per year starting July 1, 2024 
    • $151,164 per year starting January 1, 2025 

State Laws May Vary

As you navigate these changes, keep in mind that some states have their own minimum salary requirements for exempt employees. If your state’s law mandates higher minimum salaries than the federal rule, you will need to adhere to the state’s requirements. 

Potential Obstacles to Keep in Mind

Although the new rule is set to take effect on July 1, 2024, it’s important to be aware of potential challenges that may arise. In the past, when the DOL attempted to make significant changes to the salary minimums, the rule faced legal challenges and was ultimately blocked just weeks before its scheduled implementation. 

While we cannot predict with certainty whether this will happen again, it’s highly likely that the final rule will face litigation. As an employer, it’s crucial to stay informed about any developments and be prepared to adapt your plans if necessary. 

Steps Employers Can Take Now

So, what can you do to prepare for the upcoming changes? Here are a few key actions to consider: 

  • Review your employee classifications. Carefully examine your currently exempt employees and determine whether they will meet the new minimum salary requirements. If not, you’ll need to decide whether to increase their salaries or reclassify them as nonexempt. 
  • Assess the impact of reclassification. If you decide to reclassify employees as nonexempt, ensure that you provide them with the rights and benefits they’re entitled to, such as minimum wage and overtime pay. Keep in mind that this can significantly impact your budget and scheduling, so it’s important to plan accordingly. 
  • Stay informed. Keep a close eye on any updates or challenges to the new rule, and be prepared to adjust your plans if needed. Consider subscribing to updates from the DOL or industry organizations to stay informed about the latest developments. 

Key Takeaways

The DOL’s new rule is set to have a significant impact on many businesses, and it’s essential for employers to understand what’s coming and how to prepare. By reviewing your employee classifications, assessing the impact of reclassification, and staying informed about any updates or challenges, you can ensure that your business is well-prepared for the changes ahead. 

If you have any questions or concerns about the new rule, don’t hesitate to reach out to your legal or financial advisors for guidance. 

Review and Closing Thoughts

The DOL’s final rule on exempt employee minimum salaries is a complex and significant development that will require careful attention and planning from employers. Let’s recap the key points: 

  • The minimum salary for exempt EAP employees will increase to $844 per week on July 1, 2024, and to $1,128 per week on January 1, 2025. 
  • Computer employees can be paid on a salary basis (subject to the same minimums as EAP employees) or an hourly basis (at least $27.63 per hour). 
  • Highly compensated employees must meet the EAP salary minimums and total annual compensation thresholds of $132,964 (as of July 1, 2024) and $151,164 (as of January 1, 2025). 
  • State laws may require higher minimum salaries, which employers must follow. 
  • Automatic updates to the minimum salary levels will occur every three years starting on July 1, 2027. 
  • Potential challenges to the rule may arise, similar to what happened with the previous attempt to update the salary minimums. 

Steps for Employers to Take

To ensure compliance and minimize disruption, employers should take the following steps: 

  • Review current employee classifications and salaries to identify any necessary changes. 
  • Decide whether to increase salaries for affected employees or reclassify them as nonexempt. 
  • If reclassifying employees, ensure they receive the appropriate rights and benefits (e.g., minimum wage, overtime pay). 
  • Stay informed about any updates, challenges, or changes to the rule. 
  • Plan for future automatic increases to the minimum salary levels. 

Staying Informed and Seeking Guidance

Navigating these changes can be challenging, but you don’t have to do it alone. Stay informed by regularly checking for updates from the DOL and other reliable sources. If you have questions or concerns, reach out to your legal counsel or financial advisors for guidance. 

By understanding the new rule, planning ahead, and staying informed, you can ensure that your business remains compliant and well-prepared for the changes ahead. 

BMA Payroll

If you have any questions about the new rule or need assistance ensuring your business is compliant, the experts at BMA Payroll are here to help. Contact us today to learn more about our payroll services and how we can support your business through these DOL changes and beyond.