2025 FLSA Salary Threshold & Minimum Wage Updates
Oct 10, 2024
The expected Fair Labor Standards Act (FLSA) rule on overtime thresholds for exempt employees has come to a screeching halt following a ruling from a federal judge in Texas. To keep it simple, employers do not need to adjust employee salaries to account for the adjusted overtime threshold heading into 2025. Ultimately, the ruling reverts the overtime salary threshold back to the 2017 amount of $35,568, eliminating the most recent increase that went into place on July 1, 2024.
However, the first of the year still means that several states are increasing their minimum wage for hourly employees. These changes impact businesses of all sizes, so it’s essential to stay ahead of the curve and ensure compliance.
What Happened to the FLSA Changes for 1/1/2025?
Once the Department of Labor issued the 2024 ruling on increasing the exempt salary threshold in April, it was quickly met with several court challenges stating that the DOL was overstepping its authority. The move would affect roughly 1 million workers – reclassifying them through a two-step initiative from exempt status to non-exempt and making them now eligible for overtime pay.
However, despite facing legal challenges, the plan continued to move forward with the first step of raising the salary threshold on July 1, 2024 nationwide with the exception of Texas public employers. At that time, employers either decided to raise their salary exempt employees to meet the $43,888/year or change them to hourly employees.
Now, just weeks away from the January 1, 2025 increase of $58,656/year, part two is no longer moving forward. In fact, the decision made by the federal judge in Texas not only eliminates the upcoming increase but nullifies the increase many employers already implemented just a few short months ago.
So why did this happen? The federal judge who made the ruling felt that the new rules replaced the duties test to determine exempt eligibility with a salary test. The DOL’s plan also created an automatic salary threshold increase to happen every three years based on wage data at the present time. This factor would set the DOL’s “rulemaking on autopilot”.
What Do the FLSA Changes Mean for Employers?
Many employers have already moved forward or adjusted employee’s pay in preparation for the upcoming January 1, 2025 salary threshold rule. While there isn’t guidance on what steps should be taken next, those steps are left to the discretion of the employer there are somethings to consider:
- Are your employees aware of the changes that were scheduled to happen?
- What communication has already gone out to employees?
- Whatever moves you make, how will this affect morale?
- Will anything happen if you do nothing?
Regardless on how you choose to proceed there are good housekeeping steps to work through heading into the new year.
- Audit Current Employee Classifications: Conduct an internal audit to ensure that all employees are correctly classified as exempt or non-exempt according to FLSA rules.
- Budget for Wage Increases: Employers should anticipate potential increases in labor costs, whether salaries have already increased, overtime hours are anticipated, or state minimum wage hikes. Factoring these increases into your 2025 budget will help avoid financial strain.
- Adjust Payroll Systems: Review and update your payroll software to accommodate the new wage rates and overtime rules. Ensuring your systems are prepared will streamline compliance and prevent errors in wage calculations.
2025 Minimum Wage Updates
As we move into 2025, several states are set to implement increases in their minimum wage rates, which can impact overtime calculations.
The following states will be impacted by the changes:
- Arizona: From $14.35 to $14.70 per hour.
- California: From $16.00 to $16.50 per hour.
- Colorado: From $14.42 to $14.81 per hour.
- Connecticut: From $15.69 to $16.35 per hour.
- Delaware: From $13.25 to $15.00 per hour.
- Illinois: From $14.00 to $15.00 per hour.
- Missouri: From $12.30 to $13.75 per hour.
- Maine: From $14.15 to $14.65 per hour.
- Michigan: From $10.33 to $10.56 per hour, with a second increase on February 21, 2025, raising the minimum wage to $12.48 per hour.
- Minnesota: From $10.85 to $11.00 per hour.
- Montana: From $10.30 to $10.55 per hour.
- Nebraska: From $12.00 to $13.50 per hour.
- New York: From $16.00 to $16.50 per hour.
- Ohio: From $10.45 to $10.70 per hour.
- Rhode Island: From $14.00 to $15.00 per hour.
- South Dakota: From $11.20 to $11.50 per hour.
- Vermont: From $13.67 to $14.01 per hour.
- Virginia: From $12.00 to $12.41 per hour.
Conclusion
Employers in these states should prepare for these changes, as higher minimum wages can also impact salary thresholds for exempt employees and increase overall payroll expenses. Proactive planning is essential to ensure compliance and maintain payroll budgets effectively.
With over 29 years of experience, our expert payroll team can help your business ensure compliance with employment laws, and self-service payroll systems for employees, and provide you with ongoing consultive HR support to address any issues promptly.
Schedule a meeting with HireLevel today to discuss your payroll and HR needs and discover how we can help you streamline your processes and achieve your goals.
Additional Resources
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