Fed Raises Minimum Salary Requirements For Exempt Status

New minimum salary requirement jumps from $684 to $844 per week and applies as of July 1, 2024, with another jump planned for 2025.

Last Reviewed: May 8, 2024

The Department of Labor (DOL) is raising the minimum salary requirement under the Fair Labor Standards Act (FLSA) from $684 per week to $844 per week as of July 1, 2024.

Brief history of FLSA

FLSA became law in 1938 and was the first federal regulation of employment practices to withstand a Supreme Court challenge. 

It eliminated most child labor practices and established a minimum wage ($.25 per hour) and minimum weekly salary of $100 in order to be exempt from overtime pay.

FLSA required overtime pay for nonexempt workers that put in more than 44 hours in a week. That standard dropped to 40 hours a couple of years later.

Meanwhile, the minimum salary requirement for exempt status has changed many times through the years. It last changed in 2020 from $455 to $684 weekly.

New minimums phase-in 

The new regulations establish the minimum salary at the 35th percentile of full-time salaried workers in the lowest wage Census region, which is $1,128. 

Because the new minimum represents a significant increase over the previous minimum of $684, the DOL opted for a phased-in approach.

  • Phase 1: $844 per week (equivalent to $43,888 per year) on July 1, 2024. 
  • Phase 2: $1,128  per week (equivalent to $58,656 per year) on January 1, 2025. 

After that, the minimum salary will change every three years on July 1, starting in 2027. 

Note: The minimum salary for exempt status applies for part-time employees. In simpler terms, the minimum salary for exempt status applies whether an employee works one hour or 40 hours. 

Increases for highly-compensated individuals

The salary thresholds for highly compensated classification also increased from $107,432 to $132,964 (for 2024) and $151,164 for 2025.

What this means for churches and church leaders

All churches should immediately evaluate all positions and determine which positions are subject to the ministerial exception. That is because ministerial exception positions (clergy, pastors, ministers, and others with spiritual duties) are exempt from all labor laws, including federal and state minimum wage and overtime laws. 

From there, a church must determine what positions may change from exempt to nonexempt under the new minimum salary test. The church must act quickly regarding positions with compensation of less than $844 per week, or $43,888 annually. The church must either re-classify these workers as nonexempt or increase their compensation to $844 per week or $43,888 annually.

If you’re a Church Law & Tax member but haven’t yet spent time in Frank Sommerville’s 6-part series on church employment best practices, now is a good time to go through it.

Many churches err by classifying workers as exempt when they fail the duties test. Churches should also use this opportunity to review all their exempt positions to confirm that they otherwise qualify for their exempt classification.

Remember, the ministerial exception classification is entirely independent of the worker’s classification for income tax purposes. For example, a children’s ministry director may not qualify as a minister for income taxes because he/she does not possess a ministerial credential. However, the children’s ministry director qualifies for the ministerial exception for employment laws. 

Schools (K-12) should note that school teachers and school administrators are not subject to the minimum salary test. 

The church should discuss with an employment law professional to determine whether a preschool or daycare center qualifies as a school for employment laws.

The other standards for exempt status remain unchanged. These standards include that the employee must be compensated by salary that may not vary based on the number of hours worked. The worker must perform specific duties as defined by the Department of Labor. These duties tests include Executive, Administrative, and Professional duties. The defined duties must represent the workers’ primary duties. The Department of Labor will make the determination based on the totality of the circumstances. 

Elaine Sommerville’s “Church Compensation: From Strategic Plan to Compliance” covers FLSA classification in great detail. Advantage Members enjoy 20% off this important reference work for church leaders.

Important Caveat

Many business groups have filed a suit to block previous increases in the minimum salary.

New lawsuits are expected to challenge this latest increase. Some uncertainty will exist until the increase is implemented. Church administrators need to monitor the status of this proposed increase, but should still plan to implement the changes to comply with this new announcement.

Frank Sommerville is a both a CPA and attorney, and a longtime Editorial Advisor for Church Law & Tax.

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

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