On Tuesday, April 23, 2024 the United States Department of Labor issued a much anticipated rule increasing the salary threshold used to determine whether certain workers are exempt from overtime pay under the Fair Labor Standards Act (“FLSA”).   When properly classified, ”Executive” or “Administrative”  or “Professional” employees who are paid on a regular salary basis  that meets or exceeds a certain threshold may be exempt from overtime pay requirements if they perform certain job duties.  New York State has its own salary thresholds, which are considerably higher than the federal threshold (currently, $35,568 ($684 per week) a level set by the Trump administration.) Most recently, the New York State Department of Labor set the minimum salary thresholds for executive and administrative workers at $62,400 per year ($1200 per week) for New York City and the surrounding areas and $58,458.50 ($1124.20 per week) for the rest of the state.  There is currently no salary threshold for the professional exemption in New York; workers need only meet the duties and education requirements.  The New York salary thresholds apply to all private employers in the State, as well as non-teaching employees of public-school districts or BOCES.  For the remaining NYS public sector employees, the minimum salary is that set by the FLSA.

Effective July 1, 2024, the FLSA salary threshold will increase to $43,888, and to $58, 656 ($1128 per week) effective January 1, 2025.   This may be of little impact to many of New York’s private sector employers as the current salary threshold of $58,458.50 for the administrative and executive exemption is scheduled to increase to $60,405.80 ($1161.65 per week) on January 1, 2025.  However, private sector employers must look at their current professional salaries to see if they comply with the new federal limit, which could present a challenge for smaller companies or not for profit organizations.

The change will have significant impact on public sector employers who must ensure exempt workers are paid at or above the new FLSA salary threshold.  The jump from $35,568 to $43,888 and then to $58,656  (nearly a 40% increase in less than a year) could cause substantial financial impact.

The new rule also impacts the exemption for highly compensated employees (“HCE”).  This exemption can be applied to employees who earn a total annual compensation of $107,432 or more (at least $684 per week of which is paid on a salary or fee basis), whose primary duties include office or non-manual work, and who “customarily and regularly perform at least one of the exempt duties or responsibilities of an exempt executive, administrative or professional employee.”  Employers often rely on this exemption when the position at issue does not meet all of the requirements in a particular exemption test.  Note however, that New York does not currently recognize an exemption for HCEs.

The new rule raises the HCE salary threshold  to $132,964 per year (including at least $844 per week paid on a salary or fee basis ) effective July 1, 2024 and then to $151,164 per year (including at least $1,128 per week paid on a salary or fee basis) as of January 1, 2025.  All federal salary thresholds will now be subject to revisions every three years.

It is expected that new rules will produce legal challenges across the country by business and industry groups, especially those in states who do not have their own thresholds.  It is this same type of litigation that stifled attempts by the Obama administration to raise the salary threshold to $47,476 in 2017.  We will keep you apprised of any developments in this regard.

For reference, here are the current charts of expected NYS increases.

Executive and Administration Exemption Weekly Salary Threshold Schedule

General Minimum Wage Rate Schedule

Hospitality Industry Tipped Minimum Wage Rate Schedule (Food Service Workers)

Hospitality Industry Tipped Minimum Wage Rate Schedule (Service Employees)

As employers navigate these issues, our Firm’s labor and employment attorneys are standing by to provide legal advice.