Are You Prepared for Expanded Regulations on Employee Wages in 2024?

(Revised 5/15/2024)

In August 2023, the Department of Labor issued proposed rules to increase the salary basis threshold for exempt employees under the Fair Labor Standards Act. Final rules were issued at the end of April, and those rules increased the amount employers must pay exempt employees.

Although these final rules are expected to be challenged, employers must now prepare for this change. Here are some guidelines to help with that process.

Summary of Final Rules issued April 23, 2024

Date	Standard Salary Level	Highly Compensated Employee Total Annual Compensation Threshold
Before July 1, 2024	$684 per week (equivalent to $35,568 per year)	$107,432 per year, including at least $684 per week paid on a salary or fee basis.
July 1, 2024	$844 per week (equivalent to $43,888 per year)	$132,964 per year, including at least $844 per week paid on a salary or fee basis.
January 1, 2025	$1,128 per week (equivalent to $58,656 per year)	$151,164 per year, including at least $1,128 per week paid on a salary or fee basis.
July 1, 2027, and every 3 years thereafter	To be determined by applying to available data the methodology used to set the salary level in effect at the time of the update.	To be determined by applying to available data the methodology used to set the salary level in effect at the time of the update.

Gather the following:

List of all current employees currently classified as salaried exempt and their pay rates;
Up-to-date job descriptions for each person classified in an exempt position and
DOL fact sheets defining each of the five white-collar exemptions. While this change will primarily affect only those classified under the Executive, Administrative, or Professional exemption, this is a great time to review all positions classified as exempt.

To Do’s

Develop and/or confirm your organization’s compensation philosophy and strategy. This provides a blueprint in the prioritization of compensation review issues as it relates to new regulations impacting employee pay.
Establish or update your current compensation program especially pay grade and pay ranges. Formal pay grade systems provide for a framework of determining potential pay equity issues.
Identify under which white collar exemption(s) your position meets the duties test.
- This enables you to correct any misclassifications under the auspices of the change in the FLSA rules.
- The exemption is based on the duties the individual actually performs and not a job description which may not be current. That’s why it’s important to use updated position descriptions that accurately reflect the duties each individual is performing.
Identify those individuals whose pay is below the new salary threshold.
- Are all individuals in the same position paid below $1,059? If not, how many in the position are above or below that?
- Determine the cost of bringing each of these individuals up to the minimum salary.
Consider your options:
- Raise pay to maintain the exemption.
- Change them to non-exempt and pay them overtime after 40 hours worked in a week.
  - Hourly rate?
  - Some other payment method, such as utilizing the fluctuating workweek method of calculating overtime.
  - Ensure you have a mechanism in place to begin keeping an accurate accounting of actual hours worked as you are required to do for all non-exempt employees.
  - Reorganize workload and schedules to minimize impact from potential overtime requirements.
- Ensure you are also complying with the laws of any state in which you operate as you consider your options.
- Review all bonus and variable pay programs that include non-exempt employees. If the plans are part of a formal incentive program tied to employee productivity, then you may have to pay additional overtime of incentive amounts paid.
- Practical Considerations
  - Communicating any change from exempt to non-exempt…how will we do that?
  - Managing employees not used to accounting for time worked.
  - Impact on benefits, if any

This is an opportunity for your organization to not only evaluate compliance with the FLSA and correct any misclassifications that may have occurred. It is also an opportunity to conduct a pay equity audit. Pay equity and pay transparency rules are being considered and implemented nationally. Come January 1, 2025, it will be unlawful for an employer with at least 15 employees to fail to include the pay scale and benefits for a specific job in a job posting in Illinois. Unlike pay transparency laws in other states, employers can satisfy this requirement by including a hyperlink to a publicly viewable webpage that includes the relevant pay scale and benefits.

Post written by Christine Crews and Michael Maciekowich

Are You Prepared for Expanded Regulations on Employee Wages in 2024?

Summary of Final Rules issued April 23, 2024

Gather the following:

To Do’s

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