Employer Alert: Preparing for 2025
FLSA Salary Exemption Increases Vacated by Federal Court
The Fair Labor Standards Act (FLSA) generally requires employers to pay an employee overtime if the employee works more than 40 hours a week. Employees exempt from this requirement include administrative, professional, and executive employees—collectively referred to as “white collar” employees. To qualify for the “white collar” exemption, an employee must satisfy a three-part test—first, the employee must be paid on a salary basis; second, the employee’s primary work must be the performance of exempt duties; and third, the employee must earn a minimum threshold salary.
On April 23, 2024, the U.S. Department of Labor (DOL) issued a final rule which raised the minimum salary threshold for “white collar” employees. The final rule raised the minimum salary in two phases. First, effective July 1, 2024, the salary threshold increased to $844 per week ($43,888 annually). Second, effectively January 1, 2025, the salary threshold would increase again to $1,126 per week ($58,656 annually). The final rule also increased the salary threshold for “highly compensated” employees to $132,964 annually, as of July 1, 2024, and to $151,164 annually, as of January 1, 2025. Finally, the rule provided that the salary threshold for “white collar” and “highly compensated” employees would thereafter be automatically updated every three years.
On November 15, 2024, the U.S. District Court for the Eastern District of Texas vacated and set aside the DOL’s final rule in its entirety for all employers nationwide. This includes the salary threshold increases that previously went into effect on July 1, 2024. As a result, employers who were planning to change employees’ exemption status or salary on January 1, 2025 now have a basis to reconsider or postpone those changes. However, for employers who already reclassified positions or raised salaries earlier this year to satisfy the July 1, 2024 requirement, or employers who have already announced changes in exemption status or salary for next year, we recommend speaking with legal counsel before taking actions to rescind those changes.
Increased Minimum Wage
Minnesota’s minimum wage with be adjusted to $11.13 per hour for all Minnesota employers beginning January 1, 2025. Employers should also be aware of even higher increases to minimum wage requirements at the municipal level. For example, beginning January 1, 2025, the Minneapolis minimum wage will increase to $15.97 for all employers.
Elimination of Alternative Minimum Wage for Small Employers and Minor Employees
This year, the Minnesota legislature eliminated the reduced minimum wage standards previously used for small employers and minor employees. Beginning January 1, 2025, a lower minimum wage may be paid only to those under the age of 20 and only for the first 90 days of their employment.
Salary Disclosure Required in Job Postings
Beginning January 1, 2025, employers with 30 or more employees at one or more sites in Minnesota must disclose employee salaries and benefits (including health and retirement benefits) in all job postings or advertisements. This includes any job posting or advertisement made indirectly through a third party like, for example, a recruiting agency. Covered employers must disclose the starting salary range for each posted position, including the minimum and maximum annual salary or hourly range of compensation at the time of the posting. While salary ranges may be based on an employer’s good faith estimate, the range may not be open-ended. Furthermore, if an employer does not provide a salary range, it must identify a fixed rate of pay.
Changes to Earned Sick and Safe Time
This year, the Minnesota legislature passed the new Earned Sick and Safe Time (ESST) statute. Effective January 1, 2024, the new ESST statute requires Minnesota employers to provide paid leave to employees. This paid leave can be taken for various reasons, including when the employee is sick, to care for a sick family member, or seek assistance if they or a family member experienced domestic abuse.
While the new ESST law allows employers to adopt more generous policies that meet or exceed the statutory requirements, beginning January 1, 2025, we will see a significant change in how the statute impacts these employer paid time off (PTO) policies. Specifically, all employer-provided PTO will be converted into protected ESST leave, even if the paid leave exceeds the statutory requirements, provided that the employee uses this time for their own personal injury or illness. In short, if an employer is meeting their ESST statutory obligations through a PTO policy that is more generous than the ESST statute requires, all hours available for use as PTO must also be available for ESST usage.
For a complete overview of Minnesota’s new ESST statute, including employer coverage and requirements, view Jordon’s prior post here.
Attorney Jordon Greenlee works with employers of all sizes, from small businesses to nationwide companies, to develop workplace solutions, risk management strategies, and employment policies. For more information on this topic or for help with employment-related inquires, contact the Parker Daniels Kibort labor and employment team at 612.355.4100.
