New DOL and FTC rules (maybe) mandate employment changes

The week beginning April 21, 2024, was a busy and high-profile week for the Department of Labor (DOL) and the Federal Trade Commission (FTC), both of which issued new rules that require employers to thoroughly review their use of the exempt classification under the Fair Labor Standards Act (FLSA) and noncompetition restrictions. Though enforcement dates are set under both rules, legal challenges are anticipated and already pending, likely affording employers a pause and/or altogether excusal from the new requirements.

DOL rule—exempt salary threshold

Under the FLSA, employees are entitled to overtime compensation for any week in which they work more than 40 hours, unless they are classified as “exempt.” Certain “white-collar” employees are eligible for executive, administrative, and professional exemptions if they are compensated on a salary basis at a rate not less than $35,568 annually, and if they satisfy the corresponding duties tests.

The new DOL rule, released on April 23, 2024, increases the salary threshold from $35,568 to $43,888 beginning on July 1, 2024, and then to $58,656 on January 1, 2025.

This means employers with exempt employees who are earning less than the increased salary thresholds must decide whether to raise such employees’ annual compensation or reclassify them as nonexempt and, therefore, eligible for overtime compensation.