New England Biz Law Update
Come 2025, at least four million workers in the United States are expected to be impacted by changes to the Fair Labor Standards Act (FLSA) overtime rules that were finalized in April and began the first step of implementation last month.
“The Fair Labor Standards Act is the federal law that governs wage payment for all employees across the nation,” said Benjamin E. Mudrick, a partner with the law firm of Harter Secrest & Emery who is a member of the firm’s Labor & Employment practice. “Under the Fair Labor Standards Act, every employee is eligible for overtime unless they fall into an exemption category and there are lots of different types of exemptions.”
The recent changes to the FLSA update and revise the regulations for determining whether certain salaried employees are exempt from minimum wage and overtime requirements.
Under the new rule – called “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees” – the salary threshold for executive, administrative and professional employees (aka “white collar employees”) increased from $684 per week to $844 per week on July 1. The salary threshold will increase again to $1,128 per week on January 1, 2025.
The new rule also increased the total annual compensation for those classified as highly compensated employees –from $107,432 to $132,964 on July 1 and will increase again to $151,164 on January 1, 2025.
These are the first federal increases since January 1, 2020, and, per the new rule, automatic, future increases based on then-current wage data will occur every three years starting January 1, 2027.
In their Frequently Asked Questions document about the new rule, the Department of Labor explained its rationale for revising the exemption regulations as follows:
“The Department is committed to keeping the earnings thresholds up to date for the benefit of both workers and employers. Over four years have passed since the 2019 rule, during which time salaried workers in the U.S. economy have experienced a rapid growth in their wages, which has decreased the effectiveness of the $684 per week salary level established in 2019 in helping to define the EAP exemption. In this final rule, the Department is updating the salary level test to more effectively identify who is employed in a bona fide executive, administrative, or professional capacity and ensure that the FLSA’s intended overtime protections are fully implemented.”
“It’s certainly caught a lot of attention and a lot of headlines,” said Ibrahim Tariq, a partner with the law firm of Harris Beach (which recently announced it will combine with New England based firm Murtha Cullina in January 2025) about the new rule. “However, the actual impact for employers in New York state, I think, is somewhat limited; and that’s because New York state already has its own minimum salary levels for overtime exemption and those levels have consistently been higher than the level set by the U.S. Department of Labor.”
Regardless, Tariq says now is a good time for all companies to review their exemptions to make sure everyone is classified properly at both a state and federal level.
“Misclassifying employees as exempt when they should have been nonexempt is a very costly mistake to make,” Tariq said. “If somebody has been misclassified or argues that they have been misclassified as exempt when they should have been nonexempt, they will argue that they should have been paid overtime pay for every week where they worked overtime.”
If that happens the penalties set by law will most likely be more costly than had the employer paid overtime to begin with.
“If an employer violates the overtime rules, they could be subject to a lawsuit by the employees where they could be entitled to either twice the amount of unpaid wages or sometimes three times the amount, depending on the severity of the violation and also reimbursement of their attorney’s fees,” said Stacey E. Trien, a founding partner with the law firm of Adams Leclair who focuses her practice on employment law and commercial litigation.
Trien notes that if such a case is filed against your business, your own attorney’s fees to defend your business in the litigation can also be quite high. One suggestion she has is for companies is to consider employment practices liability insurance (EPLI) which helps protect from employment-related claims, including wage claims.
With the new FLSA overtime rule underway, Trien recommends employers double-check the current salary thresholds and be aware when they increase because employees who have been exempt in the past may no longer be.
The changes to the new federal rule are being challenged in court. In June 2025, a federal judge in Texas issued an injunction temporarily blocking the new federal overtime rule from taking effect for state white-collar employees after a legal challenge was brought by Texas.
As of now, the injunction is quite narrow and applies to employees of Texas only, but there is a possibility it could lead to the delay of the next step in implementation on January 1, 2025, or other action.
“While there’s a significant likelihood that the January 1 increase will not take effect as scheduled employers should continue to monitor and plan for its implementation in case it does take effect,” said Mudrick, who encourages employers to review the salary thresholds for all employees to make sure they’re above the federal threshold and potential state thresholds in New York and other states where they have employees.
While the new federal rule focuses on changes to the salary threshold, Mudrick says it’s also important for employers to keep in mind that salary or job title alone is not enough to make somebody exempt; there are also strict duties tests set forth by the DOL.
“A lot of employers get in trouble because they think simply paying somebody the minimum salary required by law makes somebody ineligible for overtime,” he said. “That’s just simply not the case. There are lots of examples of people who make well above these thresholds who still are entitled to overtime.”
