Last month the Federal Court in East Texas vacated the U.S. Department of Labor’s (DOL) salary level test regulations. This DOL rule had moved the weekly salary level test to $844/week ($43,888/yr.) as of July 1st this year and had scheduled a second increase that would have taken the salary level test up to $1,128/week or $58,656/yr. on January 1, 2025.
This change was projected to affect up to 4 million jobs, shifting their classification from exempt to non-exempt. As a result, thousands of small businesses would have faced new requirements for record-keeping and overtime pay.
Many ASE members have moved salaries or had planned to respond to this regulatory change by either increasing some jobs salaries to keep up with the new salary level test or decided to leave pay alone and make the position(s) non-exempt.
Shortly after the federal court vacated this new rule and took the salary level test back to where it has been for quite a few years, ASE surveyed our members on how they are responding to this reversion to the $684/week ($35,568/yr.) salary level test.
Of the 94 respondents, over 63% of them did not change their pay levels in response to the new regulation. Some respondents no doubt already paid their exempt employees above where the salary level test was moving to and also above where it was scheduled to move up to January 1st. Others could most likely be paying their exempt jobs above the July 1st salary level test. If those rates were not up to the next increase those employers could have been planning to address those positions that would be impacted by the higher salary level test taking effect January 1st.
Just over 36% of the sample reported they changed certain job salaries to meet the new salary level test.
Those respondents were then asked what changes were made? The majority of those respondents reported they had increased the salaries of those employees to meet the anticipated threshold (64%), while 32% reported they elected to change the exemption status to non-exempt rather than increase the salaries to maintain exempt status. One respondent (4%) reported they had made the changes when the salary level test moved up July 1, 2024, but as of this time had not made any changes in anticipation of the scheduled January 1, 2025, increase.
The third question on this short survey asked those that had made changes to salaries, what they intend to do now that the salary level test reverts to the old salary level test of $684/week? 70% reported they would not be making any changes back to what they had before the Court struck down the rule. 25% reported they had not at this time decided what they would now do, and only one respondent (5%) reported they were reverting all affected positions back to their prior status.
The reversion of the salary level test now puts the onus of proper Fair Labor Standards Act exempt job classification status primarily back on those jobs meeting the “Job Duties” tests for Executive, Administrative, or Professional exemptions.
It is recommended that employers review their exempt job classification determinations. If they have been correctly classified at this time, your organization is all set for now. If, however, a job was misclassified and should have been non-exempt all along, now might be the best time to properly classify those jobs going forward.
ASE Connect
For Human Resource professionals that need a refresher on FLSA Exempt Classification determination we invite you to join us at our next FLSA class on December 11 or an upcoming session in 2025. Learn more and register here. The class is offered virtually and across several ASE training locations.