Monitoring and following the latest payroll requirements is critical for maintaining a fiscally responsible – and legally compliant – organization. In January 2025, changes to the Fair Labor standards Act (FLSA) will impact overtime wages for many businesses.

The Fair Labor Standards Act

The Fair Labor Standards Act (FLSA) of the Department of Justice establishes minimum wage, overtime pay, recordkeeping, and youth employment standards for employees in the private sector and in Federal, State, and local governments. FLSA regulations require that certain employees be paid a minimum salary in order to be exempt from minimum wage and overtime requirements. Employees who meet that salary threshold must also generally be considered executive, administrative or professional employees (often referred to as  “white collar professionals”), or highly compensated employees.”

Changes to Overtime Requirements

This past April, the DOL issued an FLSA Final Rule that took effect July 1, 2024. For the first time since January 2020, the salary threshold for exempt executive, administrative, and professional (EAP) employees was raised from $684 per week to $844 per week. The compensation threshold for exempt highly-compensated employees increased from $100,000 to $107,432.

On January 1, 2025, those thresholds will increase again – to $1,128/week for EAP employees and $151,164 for high wage-earning employees.

In addition, the new rule includes a mechanism to automatically update these thresholds every three years beginning July, 2027.

Considerations for Employers

Employers should take steps to ensure that the new FLSA requirements are being met, as well as to avoid any liability that may result from misclassifying employees. These actions could include:

• Reviewing the exempt status and salaries for all employees to make sure those classified as exempt have a salary at or above the minimum threshold, and perform duties that fit the applicable exempt category’s duties test.
• Reclassify employees, as needed, based on the increasing threshold.
• Notifying employees of their exempt status and overtime eligibility in order to avoid misunderstanding or confusion.
• Review timekeeping systems and policies so that accurate records are kept and appropriate wages are paid.
• Check the wage laws in each state where employees work; a handful of states have higher minimum salaries for exempt employees than the FLSA requirement.