DOL final rule includes updates to the salary levels every three years . These automatic increases are based on earnings data using the U . S . Bureau of Labor Statistics ' most recent available data and using " the methodologies in effect at the time of each update ."
Interestingly , the final rule departs from the DOL ' s August 2023 proposed rule by setting higher salary thresholds in the final version and leaving intact the special federal salary levels for U . S . territories .
Quick Review on Exemption Eligibility
A review of the requirements for the white-collar overtime exemptions is helpful to place this final rule in context .
To qualify for the EAP exemptions , an employee must meet three basic requirements : ( 1 ) perform work that primarily involves executive , administrative , or professional duties as defined in DOL regulations , or the " duties " prong , ( 2 ) be paid a predetermined fixed salary not subject to reduction due to work quality or quantity , or the " salary basis " prong and ( 3 ) receive a minimum salary amount , or the " salary threshold " prong .
The HCE exemption provides a less-stringent duties prong for individuals otherwise meeting the specific salary requirements of the HCE exemption .
Potential Challenges ? Uncertainty surrounds the legality of the rule .
The final rule exceeds levels proposed by the Obama administration ' s 2016 rule , which sought to raise the salary level threshold to more than $ 47,000 per year . Days before that rule was scheduled to take effect , the U . S . District Court for the Eastern District of Texas invalidated that rule .
Challenges to the DOL ' s 2019 rule are ongoing in Mayfield v . U . S . Department of Labor , as the U . S . Court of Appeals for the Fifth Circuit is currently considering whether the Trump-era rule increasing the salary level threshold is authorized by federal law .[ 1 ] The appellants are contesting the DOL ' s fundamental authority to issue any salary-level test .
Interestingly , in a 2023 U . S . Supreme Court decision in Helix Energy Solutions Group Inc . v . Michael J . Hewitt on the salary basis prong in the context of a daily salary , Justice Brett Kavanaugh also seemed to question whether the DOL had the authority to set minimum salary thresholds .
Next Steps to Consider Absent a successful challenge , the effect of the final rule is immediate as of July 1 .
Current employees qualifying for the duties test will not qualify for the white-collar overtime exemption if they are paid a salary that is less than the new salary level .
Employers are faced with the challenge of either ( 1 ) reclassifying the employees with salaries falling short of the new minimum salary as nonexempt , overtime-eligible employees , or ( 2 ) increasing salaries to meet the DOL ' s new salary thresholds .