Second FLSA Exempt Level Salary Increase to Occur January 1st – A Couple of Ideas to Comply

Effective January 1, 2025, employers that wish to maintain the FLSA exemption for certain jobs will have to increase salaries from a minimum of $844/week/$43,888/yr, to $1,128/week/$58,656/yr. This next increase is obviously the bigger of the two regulatory changes and may compel some employers to choose not to increase the salary levels and in turn convert those positions to non-exempt. This will mean they will become overtime eligible, and certain recordkeeping activity will now be required.

Many employers have already audited those positions that will be affected by the FLSA change to the salary level test. If not, it is recommended employers look at  which exempt positions are paid less than the $1,128/week ($58,656/yr.) and make a decision as to whether they will increase pay to comply with the new salary level test or decide to change the exempt position to non-exempt.

If it is decided that the position will become non-exempt going forward, a couple of tips are suggested by Daniella Porat in her Law360 article.

1. Review timekeeping and compensability practices with the newly nonexempt. Will these employees need to have timecards? There will be other policies about working overtime and authorization to do so that the employee will need to be informed about. It is recommended that employers initiate “guardrails” to properly monitor newly non-exempt employee work hours. Formerly exempt employees may not realize that looking at emails and responding to text messages in off hours is hours worked as a non-exempt employee. And what if they travel? The FLSA rules around non-exempt employee travelling are complex. The Porat article points out that those regulations covering nonexempt travel mean that travel time away from home that cuts across a workday or even a non-workday are compensable. Does the manager that is now non-exempt understand that and will he/she properly record those hours worked? Catherine Ruckelhaus who is general counsel and legal director for the worker advocacy nonprofit National Employment Law Project states that when all is said and done “it is the employer’s responsibility to keep accurate records of hours worked and wages paid.”
2. Clearly communicate with the employee(s) going from exempt to non-exempt. Some may have no problem with the change, but others may see this change as a negative having achieved a level where they are getting a salary and are now considered an hourly employee. We have gotten this same question from some of ASE’s members. How do I explain to a formerly salaried manager that they now are paid hourly and have to fill out a time sheet? Mark Wallin who works for the management-side law firm of Barnes & Thornburg LLP suggests communicating to those employees that the change in the law moved the salary threshold up on their position, the company has evaluated this change, and “in order to allow you to earn overtime, we’re going to reclassify” the position to non-exempt. Pointing to the change in the law allows the employer to provide an explanation as to the change in the employee’s job classification that may be easier to accept.

Hopefully this next step up in the exempt salary level test will not create major headaches for ASE members, but it is recommended that members review their exempt classifications to avoid compliance and employee relations problems. This change also offers employers the opportunity to review whether their jobs were truly exempt to begin with. Many jobs may have been non-exempt not because they were paid below the required salary level but because they did not meet the job duties test of their particular exemption. Now is also a good time to review whether some positions should never have been exempt due to not meeting that important requirement.

Source: LAW360 Employment Authority. 3 Tips to Manage Salary Level Increase Under FLSA Rule (10/18/2024)

By Michael Burns, courtesy of SBAM-approved partner, ASE.

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