The federal Fair Labor Standards Act – the FLSA - establishes maximum hours and minimum wages for employees, and requires that employees be paid at least one and one half times their regular hourly rate for all hours worked in excess of 40 in any work week. The regular hourly rate must be at least the minimum wage.

The FLSA exempts specific categories of employees from its overtime provisions. Commonly used exemptions apply to bona fide executive, administrative, professional, outside sales, and computer employees – the so-called EAP exemption. In each case, the exemption requires that employees perform certain duties and be paid a minimum annual salary which not subject to reduction based on the quality or quantity of work performed.

A separate exemption applies to highly compensated employees, who, by virtue of the level of compensation they are paid, are deemed to be performing exempt duties. They are therefore subject to a minimal duties test.

On April 23, 2024, the Wage and Hour Division of the Department of Labor published a final rule updating these exemptions by increasing the minimum salary requirements.

Beginning on July 1, 2024, the minimum annual salary to qualify for the EAP exemption will increase from $35,568 to $43,888; on January 1, 2025, it will increase to $58,656. For highly compensated employees, the minimum annual salary will increase on July 1, 2024 from $107,432 to $132,964; on January 1, 2025, it will increase to $151,164.

Beginning on July 1, 2027, these salary thresholds be updated every three years.

Employers continue to bear the burden to establish that the applicable exemption applies based on the duties the employee actually performs, rather than the job description, and that the employee is paid the required wages on a salary basis.