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The long-awaited final rule on the white-collar exception from the Fair Labor Standards Act’s (FLSA’s) overtime rules was released last month. The new rule significantly increases the salary threshold below which the white-collar exception does not apply and provides for automatic adjustments to the salary threshold every three years.

The specific rule is that the salary threshold will be set at the 35th percentile of weekly earnings of full-time salaried workers in the lowest wage Census Region.

Under this methodology, the new salary threshold will be $844/week ($43,888/year) from July 1 until the end of this year. It will go to $48,656 ($936/week) as of January 1, 2025. Those are increases from the current $35,568/year ($684/week) salary threshold.

For highly-compensated workers, the threshold is set at the 85th percentile of full-time salaried workers nationally. That is $151,164 as of January 1, 2025. For July 1 until the end of 2024, the highly-compensated worker threshold is $132,964.

The use of a percentile of average full-time salary data is to allow for automatic updates and is used in lieu of the more commonly-used indexing for inflation. The salary thresholds will adjust based on the applicable percentile of average salaries every three years.

 Prospects: This is another rule that is likely to draw a Congressional Review Act (CRA) motion to block it (which will be vetoed by President Biden if it passes Congress). It is also likely to trigger lawsuits challenging it.

 NAIFA Staff Contact: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org.