The US Department of Labor (DOL) announced a long-anticipated final version of its changes to the “white-collar” exemptions (Executive, Administrative, and Professional or EAP) and Highly-Compensated exemptions. Claudia St. John from The Workplace Advisors discusses what this means for employers.
The final rule follows the proposed rule as there is no change to the job-duties test. However, the salary increases themselves are higher than proposed last year.
The minimum salary threshold for EAP and Highly-Compensated exemptions will increase incrementally starting with July 1, 2024 increase from $35,568 to $43,888 per year.
As of July 1, 2027 and every three (3) years thereafter, the salary basis will be recalculated based on a formula to be announced.
The EAP salary was calculated based on the 35th percentile of weekly earnings of full-time salaried workers in the lowest-wage Census region. The Highly-Compensated salary was based on the annualized weekly earnings of the 85th percentile of full-time workers nationwide.
The DOL estimates that by January 1, 2025 the exemption of 4.0 million workers will be impacted unless their employers increase their weekly salary and another 292,900 workers will be impacted with the increased Highly-Compensated salary.
While there will be outstanding questions such as how this impacts Computer exemptions or how it will impact states which have their own salary thresholds, the released rule allows most employers to start making decisions about their workforce and operational budget.
Employers should take the following actions in preparation for the effective dates:
- Review your payroll to determine which exempt employees will fall below the higher salary threshold.
- If you choose to keep those employees exempt, increase their salaries to meet the above standards by the effective dates.
- If you choose to allow those employees to become non-exempt, advise them of their new status, how to track their exact work time, and that they will be paid overtime.
- Notify employees in writing of all changes prior to the effective date.
- Consider how you will handle the salaries of employees who are not impacted as there may be wage compression.
Please reach out to The Workplace Advisors with any questions.
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E-mail:
claudia@theworkplaceadvisors.com
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Website:
www.theworkplaceadvisors.com
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LinkedIn:
/ claudiastjohn
/ theworkplaceadvisors
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