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March 17, 2025
Important Update: FLSA Salary Thresholds & Guidance on the Path Forward
Greetings HR Directors,
The vacating of the FLSA salary threshold rule this past November means that the previously announced US DOL FLSA salary threshold increases are no longer in effect. While there has not been a final decision to the outstanding appeals, DHRM is advising agencies to comply with the minimum salary thresholds established in 2019: $35,568 per year ($684 per week) for executive, administrative, and professional (EAP) exemptions, and $107,432 annually for highly compensated employees (HCE).
DHRM recognizes that this development adds complexity and potential confusion for agencies working to ensure compliance. Keep reading to find guidance on how to navigate next steps effectively.
Key Considerations & What to do Next:
If you haven’t already, audit FLSA Status for Compliance: Despite the rule being vacated, it remains critical, and is best practice, to review employees’ FLSA classifications to ensure they meet both the salary threshold and duties tests for exempt status. Regular review of position descriptions and audits of FLSA status help mitigate risk and ensure proper classification.
The linked Cardinal or HRDI instructions provide a step-by-step process to assess current state of FLSA status by position. In addition, the instructions guide you through the steps to make appropriate updates within Cardinal and according to your analysis and FLSA status determinations.
If Your Agency Did NOT Make FLSA Changes: No immediate action is required. Employees who were previously classified as exempt under the prior salary threshold and duties test may remain exempt assuming they meet both the salary threshold and duties tests for exempt status.
If You Increased Salaries to Meet the July 2024 Threshold: Agencies should maintain those salary increases to support pay consistency, employee morale, and retention. Rolling back salary adjustments could lead to employee relations challenges and potential impacts on engagement.
If Your Agency Changed an Employee’s FLSA Status to Non-Exempt: If you reclassified an employee or employees as non-exempt in response to the rule, you may decide whether to maintain the non-exempt status or revert back to exempt status if they meet the salary and duties tests.
If you decide to revert back to exempt status, consider the impact on the following:
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Employee Morale. Changes to FLSA status can cause confusion and impact employee morale, particularly if employees have adjusted to new work expectations such as overtime eligibility or timekeeping requirements.
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Communicate: Ensure employees understand why changes are being made and how decisions align with compliance requirements.
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Acknowledge the Impact: Recognize that changes to FLSA status affect more than just pay. Employees may feel uncertain about their roles, work schedules, and expectations.
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Provide Support & Resources: Offer guidance through FAQs, manager talking points, and HR support to help employees navigate any further changes.
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Employee Overtime Earnings. Some employees may have already earned overtime. If that’s the case, you may consider if an in-band adjustment to account for overtime earnings is necessary to retain the employee. Verify alignment with DHRM Compensation Policy 3.05 and your Agency Salary Administration Plan (ASAP) before communicating or making adjustments.
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Internal Alignment. If you determine that an adjustment is necessary, be sure to consider how it will impact internal alignment, and if that action would necessitate additional adjustments.
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Agency Budget. Collaborate with your Agency Finance team before any adjustment is communicated or made to ensure the budget can absorb additional expense.
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Leadership Alignment. Discuss with your Agency’s leadership team prior to making a change to FLSA status and/or employee earnings. Ensure understanding and alignment with the change, which may include high level talking points.
Monitor Changes: Stay vigilant about any future updates to FLSA regulations and prepare to adjust as necessary.
We understand that these changes are challenging to navigate, especially given the uncertainty surrounding FLSA regulations. If you have questions or need further clarification, please reach out to the DHRM Compensation Team.
Thank you for your continued diligence in ensuring compliance and supporting your workforce during this transition.
Thank you!
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