Stay up to date with the latest legal tips and information.

Department of Labor Proposes Drastic Increase in Salary Requirements for Exempt Employees

Sep 1, 2023

Author: Mark Bloom

Today, the Department of Labor proposed new regulations under the Fair Labor Standards Act (“FLSA”) that would increase the salary amount employers must pay employees classified as exempt from overtime.    

The Department of Labor’s proposed rule would:  

  • Increase the FLSA regulations’ standard salary level from $684 per week ($35,568 per year) to $1,059 per week ($55,068 per year); 
  • Increase the total annual compensation requirement for highly compensated employees from $107,432 per year to $143,988 per year; 
  • Restore overtime protections for U.S. territories, ensuring workers in those territories where the FLSA minimum wage applies have the same overtime protections as other U.S. workers; and 
  • Automatically update earnings thresholds every three years so they keep pace with changes in worker salaries, ensuring that employers could adapt more easily because they would know when salary updates would happen and how they would be calculated. 

Once the proposed rule is published, there will be a comment period for employers, employees, interest groups, and the public.  After the Department of Labor considers the comments, the final rule will be published and go into effect 60 days from publication unless legal challenges are raised. 

Employers should begin preparing for the potential increase in the standard salary level by considering the significant impact the increase would have on their budgets for 2024, and in-light of the increase in the salary level, consider reclassifying some of their salaried workforce to hourly.  Employers should also take this opportunity to ensure that they are properly classifying employees who are exempt. Employees must make sure that the duties employees perform satisfy the Executive, Administrative, Professional, Outside Sales, or Computer Employee duties exemption test. 

If you have any questions regarding the proposed regulations or conducting an audit of your exempt employees to ensure that they qualify as exempt from the overtime provisions of the FLSA, contact Mark Bloom or any of the other members of Beckman Lawson’s Labor & Employment Practice Group.