It’s long been a policy that employees are exempt from the Fair Labor Standards Act’s minimum wage and overtime protections if they are employed in a bona fide executive, administrative or professional capacity. To fall within this EAP exemption, an employee generally must meet three tests, according to the Department of Labor (DOL):
- Be paid a salary, meaning that they are paid a predetermined and fixed amount that is not subject to reduction because of variations in the quality or quantity of work performed.
- Be paid at least a specified weekly salary.
- Primarily perform EAP duties, as provided in the DOL’s regulations
The DOL’s regulations also provide an alternative test for certain highly compensated employees who are paid a salary, earn above a higher total annual compensation level and satisfy a minimal duties test.
The DOL covers current and future updates of these levels in a chart it has compiled, which is shown below. It’s a helpful reference, but be sure to work closely with payroll and accounting professionals to make sure you’re in full compliance.
| Date | Standard Salary Level | HCE Total Annual Compensation Threshold |
| Before July 1, 2024 | $684 per week (equivalent to $35,568 per year) | $107,432 per year, including at least $684 per week paid on a salary or fee basis |
| July 1, 2024 | $844 per week (equivalent to $43,888 per year) | $132,964 per year, including at least $844 per week paid on a salary or fee basis |
| Jan. 1, 2025 | $1,128 per week (equivalent to $58,656 per year) | $151,164 per year, including at least $1,128 per week paid on a salary or fee basis |
| July 1, 2027, and every three years thereafter | To be determined | To be determined |
Learn more about our tax practice, our audit services, our business advisory service or our strategic, smart and wonderfully human team of experts here.
Need something else? We’d love to hear from you, so contact our accounting firm.
Want to be among the first to know MCB’s latest insights? Subscribe to our blog and our newsletter.
@2024