As we previously reported on April 30th, the Department of Labor (DOL) announced its final rule increasing the minimum salary threshold for executive, administrative, professional, and highly compensated employees exempt from minimum wage and overtime requirements under the Fair Labor Standards Act (FLSA). In summary, on July 1, 2024, the salary thresholds for executive, administrative, and professional (“EAP”) exemptions will increase from $35,568 per year to $43,888 per year, while the salary threshold for highly compensated employees will increase from$107,432 to $132,964 per year. These salary thresholds will increase again on January 1, 2025, and July 1, 2027, with regular updates every three years.

The rule is set to take effect on July 1, 2024, but has sparked legal pushback on the grounds that it exceeds the DOL’s authority. On May 22, 2024, several business groups filed a lawsuit in Texas federal district court claiming that the new rule improperly emphasizes salary over job duties to determine exempt status. They argue this approach is similar to a 2016 DOL rule that was invalidated by the same court. On June 3, 2024, the Texas Attorney General filed a separate lawsuit in the same federal district court seeking to block the rule's implementation. Due to the pendency of these lawsuits, several industry groups have called upon the DOL to stay the effective date to allow for judicial review.

While the legal challenges could delay or even halt the rule’s implementation, employers should still prepare as if the rule will take effect on July 1, 2024. Best practices to consider include:

• Identifying all employees who currently earn below the new EAP thresholds and deciding whether or not to increase their pay or maintain their current salary levels and reclassify these employees as non-exempt and eligible for overtime payments. In making this decision, remember to assess how potential overtime costs could affect your business.
• Considering when and how to communicate any salary increase or change in exempt status to impacted employees. For any employee reclassified as non-exempt and their supervisors and managers, training should be given to ensure everyone understands the rules concerning the tracking of hours worked, meal and rest breaks, overtime calculation (including managing overtime hours), and any company benefits and policies that may apply to non-exempt employees.

Finally, we also reported in our April 30th article that at the state level, HB2363 HD2 SD2 increasing Hawaii’s “catchall” exemption from $2,000 to $4,000 per month was sent to Governor Josh Green to sign, veto or take no action. Governor Green signed this bill into law on June 21st, and it became effective as of June 21st. Employers are urged to complete their analysis of all employees who were exempt under Hawaii’s $24,000 per year catchall exemption and determine whether to increase these employees’ salary to $48,000 per year if they do not fall under FLSA or another exemption under Hawaii’s wage and hour law or reclassify these employees as non-exempt and eligible for overtime payments.

We will continue to monitor the pending litigation over the DOL’s rule.  In the meantime, members can contact their Human Resources Consultant or our HR Hotline if you have any questions regarding the above.