Department of Labor Increases Salary Level for Exempt Employees

Effective July 1, 2024, a U.S. Department of Labor (“DOL”) rule increased the minimum salary requirement for certain employees to qualify for exempt status under the Fair Labor Standards Act (the “2024 Salary Rule”). Exempt employees are generally paid on a salary basis and are not eligible for overtime. Under the 2024 Salary Rule, Executive, Administrative, and Professional (“EAP”) employees must earn a minimum salary of $844 per week, or $43,888 per year to remain exempt from overtime. As of January 1, 2025, the minimum salary level for EAP employees will increase to $1,128 per week, or $58,656 per year. Similarly, the annual salary threshold for Highly Compensated Employees (“HCEs”) increased to $132,964 on July 1, 2024, and will increase again to $151,164 on January 1, 2025. The minimum salary levels for EAP employees and HCEs will automatically increase every three years, starting on July 1, 2027.  In addition to meeting the salary thresholds, EAP and HCE employees must also meet certain job duties tests (which are unchanged by the 2024 Salary Rule) in order to be properly classified as exempt.

Under Colorado law, EAP employees must earn $1,057.69 per week or $55,000 annually to be exempt from overtime, which is higher than the new federal minimum effective July 1, 2024. Accordingly, the 2024 Salary Rule does not impact Colorado EAP salary requirements at this time. However, Colorado HCEs must now earn the federal minimum of $132,964 (which is more than Colorado’s current minimum HCE salary of $123,750) to be exempt. To ensure proper classification of exempt employees, Colorado employers must comply with state and federal wage and hour laws.

There are several pending legal challenges to the 2024 Salary Rule. For example, in State of Texas v. U.S. Dept. of Labor, the State of Texas sought a preliminary injunction to delay or prevent the 2024 Salary Rule from going into effect. On June 28, 2024, the U.S. District Court for the Eastern District of Texas enjoined the DOL from enforcing the 2024 Salary Rule against the State of Texas as an employer. Conversely, in Flint Avenue, LLC v. U.S. Dept. of Labor, the U.S. District Court for the Northern District of Texas refused to issue a preliminary injunction in another case challenging the 2024 Salary Rule. Accordingly, the 2024 Salary Rule is currently in effect nationwide, except with respect to public employees who work for the State of Texas.

We are continuing to monitor the implementation of the 2024 Salary Rule and related legal challenges. Please do not hesitate to contact the Employment Group with any questions about the new minimum salary requirements or proper classification of employees under applicable wage and hour laws.