The United States Department of Labor (“DOL”) issued a new salary test regulation for employees in the Executive, Administrative and Professional (“EAP”) classification in order to treat the employee as exempt from payment of overtime. The salary requirement was issued on April 23, 2024, with an effective date of July 1, 2024. EAP employees must be compensated on a salaried or fee basis. The EAP employees are sometimes referred to as “Part 541 employees”. Additional salary requirements take effect in January 1, 2025; July 1, 2027; and every three years thereafter based upon updated salary data.
The newly announced requirements are:
| July 1, 2024 | $844 weekly | $43,888 annually |
| January 1, 2025 | $1,128 weekly | $58,656 annually |
| July 1, 2027 | To Be Announced (TBA) | TBA |
| Every three years | TBA | TBA |
The threshold can be met by payment of a nondiscretionary bonus, incentives or commissions paid annually or more frequently if the deficiency is up to 10% of the salary required. An employer is allowed to make one final payment in the next pay period after the end of the year in order to satisfy the salary test.
Salaried employees may receive amounts over and above those weekly amounts required for sales if they also receive the required salary, or if they work more hours than their normal workweek.
If these same EAP employees are paid on a fee basis, then the fee payment must be at a rate that would meet the salary requirements if the employee had worked for 40 hours in a workweek.
There are exemptions for certain academic and educational employees, and employees practicing law and medicine. The exemptions do not apply to employees servicing the medical profession such as pharmacists, nurses, therapists, and others.
Additionally, the regulation increases the threshold for highly compensated employees increases to $132,964 in July and to $151,164 in January 2025. The latter amount will be updated every three years thereafter to reflect current DOL earnings data to be published by the Bureau of Labor Standards.
Failure to pay a salary/fee at the established required threshold will result in the need to pay these employees overtime for all hours worked over 40 hours in a workweek.
DOL estimates that some 4 million workers will be impacted positively by the regulation during the first year of its effectiveness.
Bottom Line: We strongly recommend that you use this new regulation as an opportunity to review your workplace compensation plan to ensure that you meet the salary/fee threshold and all the requirements of the EAP, highly compensated employee, or any other overtime exemption.
For more information about the application of this new regulation to your workplace, contact:
Attorneys Kathi Simpson or Kathy Speaker MacNett