© 2024 Seyfarth Shaw LLP | www.seyfarth.com Classification Guidebook | 1 Introduction At Seyfarth Shaw LLP, we have closely monitored the U.S. Department of Labor’s (“DOL”) efforts to revise the overtime exemption rule under the federal Fair Labor Standards Act (“FLSA”). The new rule, which took effect on July 1, 2024, commands attention from employers. We have prepared this Guidebook to help inform the decisions that lie ahead. As readers of this Guidebook likely know, the DOL’s exemption regulations generally require that an employee satisfy a salary level test, a salary basis test, and a duties test in order to be classified as an exempt executive, administrative, or professional employee under the FLSA. From 2020 until 2024, the minimum salary to clear the first test had been set at $684 per week (equivalent to $35,568 per year). That changed on July 1, 2024. The DOL’s new rule entails a substantial, two-phased increase to the minimum salary level for an employee to be properly classified as an exempt executive, administrative, or professional employee. On July 1, 2024, employees now must receive a salary of at least $844 per week (or $43,888 per year), in addition to satisfying the long-standing “primary duty” requirements. Beginning January 1, 2025, such employees must receive a salary of least $1,128 per week (or $58,656 per year.) Moreover, the salary threshold will increase every three years. The total compensation threshold for the highly-compensated employee (“HCE”) exemption increased to $132,964 per year on July 1, 2024, and will increase to $151,164 per year on January 1, 2025. Recall, too, that employees classified as exempt under this “relaxed” exemption test must, as a general matter: be paid a salary on a weekly or less frequent basis that equals or exceeds the minimum salary threshold noted in the prior paragraph; must have total annual compensation at or above the new total compensation threshold noted in this paragraph; and must “customarily and regularly” perform at least one exempt duty. Drawing on our collective insights and expertise, we have developed this Guidebook to assist you as you plan and execute changes in response to the new rule. The Guidebook includes among other things, sample action plans, communication plans, meeting agendas, employee notices, and FAQs. These materials are intended to be guidelines to consider as you ensure your business complied as of the July 1, 2024, effective date, and—perhaps more importantly— for the more substantial increase effective on January 1, 2025. Of course, this Guidebook does not replace the role of an organization’s trusted legal counsel— one who understands the business and the DOL’s new rule, as well as any applicable state law requirements (which are not the focus of this Guidebook), and who can wield that knowledge to provide tailored legal advice. This Guidebook is not that. It is, however, a robust reference point that is the product of hundreds of hours of collaboration, forethought, and work. We are proud of it, and we hope you find it helpful. In addition, Seyfarth maintains a 50-state survey on overtime exemptions. For access to current materials on those state overtime exemptions, Seyfarth clients can access our Survey Center platform. Please do not hesitate to contact your favorite Seyfarth lawyer if you have any questions.
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