Yesterday, the Department of Labor issued its final rule altering the overtime regulations under the Fair Labor Standards Act. The rule includes two-tiered increases to the minimum salary threshold and the threshold for highly compensated employees (HCE) as well as automatic updates to both thresholds.

The minimum salary threshold will be increased to $43,888 on July 1, 2024, and then to $58,656 on January 1, 2025. This represents over a 60% increase over the current threshold of $35,568. The Department clarified that the first increase updates the minimum salary threshold using the Department’s current methodology, which was used in the 2019 Trump-era overtime rulemaking to set the current standard. The second increase then implements the Department’s new preferred methodology, which sets the minimum salary threshold to the 35th percentile of weekly earnings of full-time salaried workers in the lowest wage Census region. 

The HCE threshold will be raised to $132,964 on July 1, 2024, and then to $151,164 on January 1, 2025 — a 41% increase from the current threshold of $107,432. The first threshold is based on the current methodology, while the second threshold is set to the 85th percentile for full time salaried workers nationally. 

The final rule also implements automatic updates to both the minimum salary threshold and the HCE threshold, both of which will be increased every 3 years. 

Employer organizations are considering litigation challenging the rule, but this phased-in implementation will likely impact how litigation is both pursued and decided over the next six months.