On April 23, 2024, the DOL published a final rule that raises the minimum annual salary threshold to classify an employee as exempt from overtime rules under the Fair Labor Standards Act (FLSA) from $35,668 to $43,888 as of July 1, 2024. A more dramatic change will take place on January 1, 2025, when the annual salary threshold rises to $58,656.
Current Starting July 1, 2024 Starting Jan. 1, 2025 Minimum Annual
Exempt Salary$35,568 $43,888 $58,656 Highly Compensated
Employee Salary$107,432 $132,964 $151,154
Why it matters: The new rule may require dealers to reclassify some exempt employees as non-exempt and require justification for classifying some employees as non-exempt. Required adjustments need to be made as of the pay period beginning July 1, 2024.
Additional Details:
- After June 1, 2024, all employees with a salary under $43,888 per year must be reclassified as non-exempt, and therefore receive overtime pay. This threshold jumps to $58,656 on January 1, 2025.
- Employers may use nondiscretionary bonuses and incentive payments (including commissions) that are paid on an annual or more frequent basis to satisfy up to 10% of the standard salary level. Existing exemptions for salesmen, partsmen, and mechanics primarily engaged in selling or servicing automobiles remain unchanged.
- See NADA’s previous compliance alert for more details about the final rule, including the highly compensated employee threshold.
In 2016, a federal court stayed President Obama’s attempt to dramatically increase salary thresholds and ultimately struck it down. The new rule may ultimately succumb to the same fate as it has been challenged in courts in Texas—with one court enjoining the rule as it applies to employees of the Texas state government and another court denying the request for an injunction.
