Federal Salary Thresholds for Minimum Wage and Overtime Exemptions May Meet or Exceed Colorado Thresholds Soon

Rob Thomas, Of Counsel

On August 30, 2023, the U.S. Department of Labor (“DOL”) announced a notice of proposed rulemaking[1] which, if adopted by the DOL as written, will significantly increase the minimum salary threshold necessary to exempt executive, administrative, and professional employees from the Fair Labor Standards Act’s (“FLSA’s or the “Act’s”) minimum wage and overtime requirements.  Additionally, if adopted, the minimum salary threshold for “highly compensated employees” may exceed Colorado’s parallel salary threshold significantly.

White-Collar Exemptions from FLSA Minimum Wage and Overtime Requirements, and the DOL’s Proposed Changes to Salary Thresholds for These Exemptions

            The FLSA provides that certain executive, administrative, and professional employees may be exempt from minimum wage and overtime requirements, provided that 1) the job positions at issue satisfy the primary duties test, and; 2) the employees are paid at least a certain minimum salary—currently $684/week (or $35,568.00 annually).  Likewise, if an employee customarily and regularly performs any one or more of the exempt duties or responsibilities of an executive, administrative, or professional employee, and earns at least $107,432.00 annually, then the employee is considered a “highly compensated employee” and is exempt from minimum wage and overtime requirements.

The DOL, via its notice of proposed rulemaking, is proposing to increase the minimum salary threshold for executive, administrative, and professional employees to $1,059/week ($55,068.00 annually), which is the current 35th percentile of weekly earnings of full-time salaried workers from the lowest-wage Census Region (the South).  The DOL is also proposing to increase the highly-compensated employee salary threshold to $143,988.00 per year, which represents the 85th percentile of earnings by full-time salaried workers nationwide.  Under the proposed rules, these thresholds will automatically update every three years, based on the same 35th/85th percentile calculations used to craft the current proposed minimum salary and highly compensated employee thresholds.

Impact on Colorado Employers

For the past few years, Colorado’s own minimum salary and highly compensated employee thresholds have exceeded the FLSA’s and are currently set at $961.54/week ($50,000.00 annually) and $112,500.00 annually, respectively.  In 2024, the minimum salary threshold for executive, administrative, and professional employees will increase to $1,057.69/week ($55,000.00 annually), and the threshold for highly compensated employees will increase to $123,750.00 annually. 

  If the DOL’s proposed regulations go into effect as currently written, then the federal minimum salary thresholds for executive, administrative, and professional employees, and the federal minimum salary threshold for highly-compensated employees will exceed Colorado’s own minimum thresholds—meaning that employers may no longer rely on Colorado’s minimum salary standards to claim exemptions from both federal and Colorado overtime laws.  This is particularly true for exemptions claimed for highly compensated employees, as the federal threshold would exceed the Colorado threshold for such employees by approximately $20,000 annually, if adopted.         

Employer Considerations

Colorado employers should pay close attention to the DOL’s notice of proposed rulemaking and review their employee classifications and salaries to evaluate whether employees will continue to be properly classified as FLSA-exempt in the event the rules are adopted, as misclassifications of employees can be exceptionally costly for employers under both federal and Colorado law.  As a reminder, if an employee does not meet either the federal or Colorado minimum salary thresholds, then the employer must pay overtime for all of the employee’s time worked in excess of 40 hours per week (or in excess of 12 hours per day, under Colorado law)—even if the employee’s job duties fall under the executive, administrative, or professional exemptions. 

Campbell Litigation will continue to monitor the DOL’s notice of proposed rulemaking and will update the Rocky Mountain Employer accordingly. Interested parties may submit written comments to the current notice of proposed rulemaking at www.regulations.gov or via mail to the DOL’s Wage and Hour Division within 60 days after the notice is published in the Federal Register

[1] See https://www.dol.gov/sites/dolgov/files/WHD/flsa/eap-exemption-nprm.pdf for a complete copy of the DOL’s proposed rules.