July 1, 2024, New DOL Salary Increase for Exempt Employees is NOW in place!
“Wolf!” the shepherd boy cried, and the villagers came running; but there was no wolf.
“Wolf!” the shepherd boy cried the next day, and the villagers came running; but there was no wolf.
“Wolf!” the shepherd boy cried the day after that, and no villagers came running; but this time, there was a wolf. This did not end well for the shepherd boy.
The Department of Labor (“DOL”) has been shouting “we’re raising the salary threshold!” for years now, and every time, legal scholars rushed to warn the people, carefully drafting meticulously researched journals and blawgs detailing what this will mean for employers and employees alike. But each and every time, when we finally get to the proverbial clearing, there’s been no wolf. Just the DOL with an apologetic look on their face being scolded by the Eastern District Court of Texas.
That’s why this time any employers did not bother rushing to the proverbial clearing at all, which in this metaphor would be our respective journals and blawgs… look, it’s not a 1:1 comparison, but you get the idea: the DOL has been claiming that this is the year that the salary threshold for white-collar overtime exemptions to the Fair Labor Standards Act will finally increase for years now, and each and every time they’re summarily defeated by the federal district courts of Texas. And when we say “defeated,” we mean total capitulation; there’s no close-call or “you’ll get ‘em next time!” The federal district courts of Texas seem to view the DOL with undisguised contempt as “big government”, and their rulings reflect as much. The DOL has never had one single, solitary reason to believe that their next attempt to raise the salary basis threshold would be any different than the last.
And yet here we are, July 1, 2024 – and TODAY is the date that the first of the DOL’s proposed increase in the salary basis threshold from $35,568/year to $43,888/year takes effect! Surprising to many of us, the federal district courts of Texas have made no move to stop the DOL’s first increase. Despite multiple legal challenges from multiple extremely well-funded, well-connected special-interest groups and lobbyists, using the very same arguments that the Eastern District of Texas has blithely rubber-stamped countless times in the past, no injunction preventing the DOL’s proposed rule from taking effect was issued.
TODAY, Monday, July 1, 2024, the salary basis threshold for white-collar exemptions to overtime under the FLSA – e.g. the executive and administrative exemptions, by far the most commonly-employed exemptions in America – increased from $35,568/year to $43,888/year.
Employers will have three options regarding this required increase:
Increase the annual salary of all exempt executive and administrative employees to a minimum of $43,888/year;
Shift all exempt executive and administrative employees from salaried-exempt status to hourly-non-exempt status, and record their hours and pay overtime wages as required under the FLSA;
If neither of these options are feasible – most likely for financial reasons – you might be compelled to lay-off certain previously-exempt employees.
While option number three is obviously a last-ditch, worst-case scenario, it may be unavoidable for some employers.
The fact is that the DOL’s proposed rule is in effect, TODAY July 1, 2024. As such, there is simply no way for employers to continue classifying affected employees as exempt without employing options number one or two. If your business cannot afford to either raise affected employees’ salaries or pay affected employees’ overtime wages (when applicable), you will have no other legal options. There are no exceptions to the DOL’s proposed rule, and no alternate exemptions available for previously exempt executive or administrative employees.
If you are still uncertain as to the exempt or non-exempt status of any of your employees, please reach out as we are here to help.