UPDATE – The minimum salary threshold under the Fair Labor Standards Act that was supposed to increase effective July 1, 2024 has been shot down.

The U.S. District Court for the Eastern District of Texas overturned the latest minimum salary requirements set by the Federal Department of Labor (FDOL).  We now must look back to salary requirements that went into effect in January 2020.  The article below has been updated to reflect the current status.

This blog post contains useful information about which employees can be considered salaried and, therefore, exempt from overtime, and which employees are treated as hourly and eligible for overtime.

New Salary Minimums

Below is a table showing U.S. Department of Labor (DOL) minimum salary amounts.  The new salary minimums that the district court invalidated are crossed through.

Effective Date	Salary per Week	Salary per Year
January 1, 2020	$684	$35,568
July 1, 2024	$844	$43,888
January 1, 2025	$1,128	$58,656

Only “exempt” employees may be paid a salary.

“Exempt” employees may be paid a salary without overtime.

“Non-exempt” employees must be paid hourly and are eligible for overtime pay.

The DOL defines overtime as one and one-half times the regular hourly rate of pay for hours worked over 40 in an employer-defined workweek.  (Caution – your state may have more stringent overtime requirements.)

Who can be an “exempt” employee?

Simply paying someone the minimum salary is not enough to make that employee exempt from overtime. An employee can qualify as exempt if:

1. The employee works in an executive, administrative, or professional capacity and is paid at least the minimum salary.
2. The employee is a “highly compensated employee” (HCE) and meets an easier-to-satisfy duties requirement.

Executive, administrative, or professional duties test

To be exempt from overtime, employees earning at least the minimum salary must also perform certain duties in an executive, administrative, or professional capacity.

Duties of an executive employee

• Manages the organization or a recognized department or subdivision
• Customarily and regularly directs the work of two or more employees
• Has authority to hire or fire employees or has strong input into hiring, firing, advancement, promotion or any other change of status of other employees
• All of the above three elements must be present, except for Highly Compensated Employees (HCEs). 29 CFR § 541.100

Duties of an administrative employee

• Performs office or nonmanual work directly related to the management or general business operations of the employer or the employer’s customers
• Exercises discretion and independent judgment with respect to matters of significance
• Both elements must be present, except for HCEs. 29 CFR § 541.200

Duties of a professional employee

• Performs work requiring advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction; or
• Performs work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.
• Either element may be present. 29 CFR § 541.300

Highly compensated employee (HCE) test

A highly compensated employee (HCE) is deemed exempt under Section 13(a)(1) if:

• The employee earns total annual compensation of $107,432 or more, which includes at least $684 per week paid on a salary or fee basis;
• The employee’s primary duty includes performing office or non-manual work; and
• The employee customarily and regularly performs at least one of the exempt duties or responsibilities of an exempt executive, administrative or professional employee. 29 CFR § 541.601

Everyone else is eligible for overtime pay unless a specific exception applies.

Interestingly, teachers and ministers are exempt from overtime pay and do not have any salary requirements. Please seek a detailed understanding of these or other exceptions to FLSA rules. We also recommend that you consult with a labor attorney.

Are nonprofits subject to the Fair Labor Standards Act (FLSA)?

You might think that a nonprofit organization is not subject to the FLSA if it doesn’t meet the $500,000 commercial sales requirement.  However, if the nonprofit’s employees engage in “interstate commerce,” which is broadly defined to include interstate mail and phone calls, then they are covered by the FLSA. Not much wiggle room!

Refer to the FLSA Fact Sheet for nonprofit organizations.

Legal Challenges

You may recall in 2016 that FDOL proposed more than doubling the minimum salary threshold from $23,660 to $47,476 per year. After much hand wringing and work to accommodate the increase, a federal judge struck down the rule because the increase was so high it undermined the duties tests.

Similarly, as described above, the salary increase that was to have been effective July 1, 2024 was also invalidated by a federal judge.

The 2019 minimum salary rule that took effect in 2020 has so far been upheld since the salary increase was not nearly as steep.

Please take DOL salary minimums seriously.

Workers who feel they have been shorted on wages or the DOL can sue for double back pay plus attorneys’ fees.

Several years ago, we had a client who was sued by an employee claiming unpaid overtime. We’re confident our client was not trying to take advantage of an employee. Rather we believe it was an oversight in a busy environment. Regardless, the employer ended up having to pay many thousands of dollars in back pay to the employee.

Here are a few things you can do to avoid problems:

• Understand DOL salary minimum rules and how they impact your organization.
• Communicate with employees.
• Define overtime policies and procedures.
• Require advance approval for overtime work.
• Use a timekeeping system.
• Pay unauthorized overtime, while taking steps to ensure employees follow proper procedures in the future.

We hope this article helps you comply with FDOL requirements. We also hope it helps you keep your organization’s compensation policies and practices up-to-date. We suggest consulting with a labor attorney if you have any concerns over how the FLSA applies to your organization.

If you want to learn more about entering payroll into QuickBooks, check out our post “Entering Payroll Expenses: Problems and Solutions.” If you are interested in how to present payroll by functional area so you can see, for example, how much payroll expense is actually involved in running programs, see our posts explaining “nonprofit overhead.”