The U.S. Department of Labor’s ongoing efforts to adjust the salary thresholds for the “white collar exemptions” under the Fair Labor Standards Act have created significant uncertainty for employers. Following the now-vacated 2024 Final Rule and subsequent legal challenges, the DOL has issued a technical amendment reverting the earnings thresholds to prior levels.
Background
The Department of Labor’s 2019 Final Rule increased the Part 541 earnings thresholds under the “white collar exemptions” as set in 2004 raising the salary level from $455 to $684 per week (equivalent to $35,568 per year). The 2019 rule also raised the total annual compensation requirement for highly compensated employees (HCE) from $100,000 per year to $107,432 per year.
Four years later the DOL published a final rule to again raise the Part 541 earnings threshold (“2024 Final Rule”). This rule raised the salary level in two increments: the first was an increase effective July 1, 2024, to $844 and another on January 1, 2025, to $1,128. The HCE salary requirement increased to $132,964 and $151,164 effective on these respective dates as well.
Legal Challenges & DOL Response
The 2024 Final Rule spawned several federal lawsuits in various district courts resulting in several judgments vacating the 2024 Final Rule. Thus, the DOL, under the Congressional Review Act, issued this “technical amendment” to the federal regulations and return these salary requirements back to the levels in the 2019 Final Rule. A technical amendment is not considered a major rule for purposes of the CRA, thus it is not subject to a sixty-day delayed effective date or a notice and comment period.
Effective as of January 1, 2020, the earnings threshold for exempt employees is again set at $684 per year and the salary for HCE’s is $107,432. This change is largely procedural.
Key Considerations for Employers
Employers who made the adjustments under the 2024 Final Rule are free to reevaluate those decisions. However, they should be sensitive to potential impacts on employee morale and retention due to any salary reductions.
Further, employers must still comply with state-specific wage and hour laws. Many states, including Ohio, as well as municipalities, have established higher salary thresholds for exemptions, and the employer must follow whichever standard is more protective of the employee. Employers must also assure that the employee satisfies the applicable duties requirements under the FLSA and is paid on a “salary basis” in addition to meeting these earnings thresholds.
Contact
For guidance on how these changes may affect your workforce or to reassess exemption classifications, please contact Maribeth Meluch (MM@kjk.com) or any attorney in KJK’s Labor and Employment practice group.