USDOL Adopts Final Rule Increasing Minimum Exempt Salary
By Anna B. Cole & Blake E. McCartney
On April 23, 2024, the U.S. Department of Labor (“Department”) announced a final rule increasing the minimum salary required to properly classify employees as exempt from federal minimum wage and overtime. The first change outlined in the rule is scheduled to go into effect on July 1, 2024, with a subsequent change effective January 1, 2025.
Under state and federal law, employers are required to pay employees minimum wage for every hour worked and overtime for every hour worked in excess of, usually, 40 hours in a work week, except for employees that the employer can properly classify as “exempt” from these rules. The most commonly utilized exemptions are sometimes referred to as the “white collar” or “EAP” exemptions and apply to employees who perform exempt executive, administrative, professional, outside sales, and computer duties and, who generally receive a guaranteed salary of at least the minimum required amount (currently, $684/week under federal law).[1] Federal law also provides a special exemption for certain “highly compensated employees,” the “HCE” exemption, who make above a certain amount (currently, $107,432 in total annual compensation under federal law) and meet a less stringent duties test.[2]
The Department’s newly announced final rule, Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees, once effective, will increase the federal minimum salary threshold required for most EAP exemptions and the HCE exemption. Of note, the final rule does not modify the exempt duties, which are also required to properly classify an employee as exempt under the EAP and HCE exemptions. The revised final rule will:
- Increase the federal minimum required guaranteed salary level for the EAP exemption in two steps (as outlined below):
| Date | Minimum Exempt Salary Level |
| Before July 1, 2024 | $684 per week ($35,568 per year) |
| July 1, 2024 | $844 per week ($43,888 per year) |
| January 1, 2025 | $1,128 per week ($58,656 per year) |
- Increase the federal total annual compensation threshold for the HCE exemption in two steps (as outlined below):
| Date | HCE Minimum Exempt Total Annual Compensation Threshold |
| Before July 1, 2024 | $107,432 total annual compensation |
| July 1, 2024 | $132,964 total annual compensation |
| January 1, 2025 | $151,164 total annual compensation |
- Adds a mechanism that will provide an automatic update to these federal minimum salary and compensation thresholds every three years beginning on July 1, 2027.
In the past, modifications to the federal EAP exemptions salary thresholds have drawn legal challenges that resulted in an injunction preventing the implementation of the changes. Such legal challenges may similarly be filed following the Department’s announcement of this final rule. We will provide updates to the extent such challenges are filed and/or in the event the changes are enjoined.
To the extent the rule goes into effect, between now and January 1, 2025, the federal minimum salary level for EAP exempt employees will increase by 65%, a percentage increase that will have a significant financial impact on many employers.
In preparation for the implementation of the final rule, employers should review the salaries/compensation thresholds of their exempt employees to assess which, if any, employees’ salaries/compensation thresholds are below the federal salaries/compensation thresholds outlined in the final rule. In that event, the employer will need to decide whether to raise the pay of such exempt employees or reclassify such employees as non-exempt and overtime eligible.
Drummond Woodsum’s team of experienced Employment & Labor attorneys are available to answer your questions about how these changes will affect your organization and how to navigate compliance with these new standards. Please do not hesitate to reach out to a member of our team with any questions.
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[1] In Maine, the minimum exempt salary level is 3,000 times the State’s minimum hourly wage or the annualized rate established by the Department, whichever is higher (currently, $42,450.20 per year).
[2] The federal exemption for highly compensated employees is not applicable under Maine law.