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Will the New Salary Thresholds Go Into Effect?
Editor's Note
Will the New Salary Thresholds Go Into Effect?
The new federal salary thresholds for exemption from overtime go into effect January 1, 2025 before the change in administration.
Last time, a court issued an injunction before they went into effect. This time, at least one legal challenge has failed, in the Fifth Circuit even. The challenge in Mayfield v. DOL claimed the Department of Labor did not have the power to set or raise salary thresholds for exemption from overtime. But a three judge panel said that Congress did expressly grant the DOL that power. Although there are additional legal challenges to the new salary thresholds, if you can't win it in Texas before the Fifth Circuit, the arguments are unlikely to prevail in other courts.
On the other hand, the next administration may be focused on other priorities and decide to take credit for the upcoming raises some employees may see.
It's likely we will see some major changes in federal employment law, particularly in how and whether laws are enforced and how and whether the agencies that enforce those laws are funded.
The important thing to know is that state laws will continue to be in effect and enforced by state agencies and courts. And some states and even counties and cities have higher salary thresholds for workers in those areas, which will also be effective. So check your state laws and make sure you will be in compliance on January 1.
In the meantime, here's more on the federal salary thresholds and some great advice on how to get ready—for whatever happens.
- Heather Bussing
What once was old is new again. For those living in caves or remote parts of the world without internet access: there was an election in the United States this week. We will have a new President. Well, not exactly “new.” Maybe a new old President? Or is it an old new President? Or perhaps an old old President? Who’s to say? Regardless, the point is that Donald Trump will be our President for the next four years. His title between now and January 20 is also a bit fuzzy: President-Elect Trump? Former President-Elect Trump? President-Elect Former President Trump? Don? Thankfully, I am not taxed with figuring out such pressing national issues. I digress…
Since Trump’s victory on Tuesday, the question of the hour from clients has been: “What’s going to happen to the DOL Salary increase set to go into effect on January 1, 2025?” The short answer is that there is no immediate change. Until further notice, the new salary threshold will go up to $58,656 on 1/1/25. No injunctions have been issued and employers need to proceed as if the new threshold will go into effect.
The longer answer requires us to get into the DeLorean and set the dial for November 2016. Employers were frenzied over the DOL’s dramatic salary threshold increase set to go into effect on 12/1/16 – nearly doubling the then-threshold. Donald Trump won the Presidential election. (Does this sound familiar?) Two days before Thanksgiving in 2016, HR Directors rejoiced over the “Thanksgiving Miracle”. That day, a court in Texas (where all federal regulations go to die) issued an injunction to temporarily block the salary increase. Trump was inaugurated President on January 20, 2017. He appointed a new Secretary of Labor who then killed the increase. About a year later, a compromise was reached increase the salary threshold to $35,568. Could something similar happen in 2024? Definitely. Possibly. Probably. Maybe.
What should employers do now?
- Analyze all exempt positions for both salary and duties requirements. Remember – the test for exemption includes both salary and duties. If you have any misclassified employees who do not meet both tests, now is the perfect time to reclassify them. If you have questions about the “Duties Test,” give us a call.
- Get prepared. Review all exempt positions and determine if they hit the current threshold ($43,888) and if they will meet the January 1 threshold ($58,656). If they are under either threshold, you need a plan to either increase salary or change to a non-exempt status. There are ways to get creative to have a net-zero budget impact, but it usually takes a bit to work through those solutions.
- Don’t delay. It’s fine to wait another week or two, but don’t let Thanksgiving pass before you take Steps 1 and 2. If you wait until the last minute and there is no “Holiday Miracle”, you will be in bad shape (and your CFO will not be amused when you tell her/him that you need to implement major changes before the next payroll).
- Don’t implement until 1/1/25. If an injunction is issued, it will be very awkward for you to walk-back raises to employees. That will certainly be seen as a lump of coal in your employees’ stockings.
I wish we could predict the future, but our flux capacitors are broken. Unless an injunction is issued, employers need to be prepared for the salary threshold to increase on 1/1/25.
[View source.]
