The minimum salary levels for many employees to continue to be treated as exempt from overtime laws were set to increase as of January 1, 2025.
However, on November 15, 2024, a federal judge struck down both the upcoming increase and the increase that went into effect on July 1, 2024. This decision applies nationwide. The Biden administration may appeal this ruling, but if the Court of Appeals reverses, such decision would likely not go into effect until after President-Elect Trump takes office, and it is anticipated that his administration will not support the increased minimum.
This means that, unless new legislation or regulations are introduced, the salary threshold for “white-collar exemptions” is effectively back to the 2019 overtime level of $684/week ($35,568 annually).
Background
The default law in Wisconsin and federally is that employees must be paid overtime wages at the rate of 1.5 times their regular rate of pay for any time worked in excess of 40 hours in a particular workweek. However, there are a number of exceptions and exemptions from this rule. One such exemption is for employees who meet certain duties requirements and are paid a minimum amount on a salary basis. If an employee is properly classified as exempt under these rules, the employee will earn their salary regardless of the number of hours worked per week.
In determining whether an employee is properly classified as exempt from overtime laws by virtue of their duties and being paid a salary, the employer must be able to clearly answer “yes” to all of the following questions:
1. Are the employee’s actual duties consistent with the requirements for exemption as an Administrative, Professional or Executive employee under the applicable law?
2. Is the employee paid not only a salary, but on a “salary basis”?
3. Is the employee’s salary equal to or greater than the minimum amount required by law?
The Court decision on November 15 dealt with the third factor above.
On July 1, 2024, the United States Department of Labor increased the minimum salary threshold for an employee to qualify for a “white collar” overtime exemption from $35,568/year to $43,888 per year. This minimum threshold will increase again on January 1, 2025 to $1,128 per week (equivalent of $58,656). The minimum amount will increase again January 1, 2027 and every three years thereafter.
It is important that employers stay up to date regarding the minimum salary levels required to treat their qualified employees as exempt from overtime laws. Employers must review the duties and compensation of all employees who are treated as exempt from overtime pay prior to and ensure that such employees are paid at least the current minimum.
Employers can work with attorneys specializing in employment law to find alternative ways to stay in compliance with changing wage and hour laws.
