On April 23, 2024, the U.S. Department of Labor (DOL) released its long-anticipated final rule updating the salary exemption threshold for executive, administrative, and professional (EAP) employees under the Fair Labor Standards Act (FLSA).

By way of background, the FLSA generally requires non-exempt employees to be paid minimum wage (currently $7.25 an hour) and overtime at time a half their regular rate for hours worked over forty in a given workweek. EAP employees may be considered exempt from these requirements if they satisfy a three-part test:

• The employee must be paid on a salary basis (meaning they receive a predetermined amount of pay which is fixed and not subject to variation based on the number of hours worked in a week) (the "salary-basis test");

• The employee must be paid a minimum salary (currently $684 per week or $35,568 annually) (the "salary-level test"); and

• The employee must primarily perform executive, administrative, or professional duties (the "duties test").

The final rule makes no changes to either the salary-basis test or the duties test. It does, however, increase the salary levels below which an employee is classified as non-exempt irrespective of their duties. This increase comes in two phases, becoming fully effective on January 1, 2025:

• As of July 1, 2024, to be classified as exempt, an employee must make at least $844 per week ($43,888 annually)

• As of January 1, 2025, to be classified as exempt, an employee must make at least $1,128 per week ($58,656 annually).

When fully implemented, the $58,656 will represent an increase of almost 65% over its current level. Going forward, the rule includes an escalator clause, which will automatically increase the salary threshold every three years.