With recent increases that took effect January 1, 2024, the minimum wage in New York is now $16 per hour in New York City and the immediately surrounding suburban counties, and $15 per hour in the rest of the state.  Connecticut is at $15.69 and New Jersey is at $15.13 per hour, both statewide.  Contrast that to the federal minimum wage: $7.25 per hour, where it has been stuck since 2009.  While states can and obviously have imposed their own, higher minimum wage laws, that is not the case for 40 percent of the country.  A tracker from the Economic Policy Institute reflects that, with very limited exceptions, minimum wage rates are highest along the east and west coasts and tied to the federal minimum wage in most of the south and much of the central United States.

Minimum Wage Impacts Which Workers Can Be Classified as Exempt

Others can argue the policy implications of that huge compensation differential.  This article highlights the legal implications for another sector of employees – those who are paid a weekly salary and classified as exempt from the federal and state overtime laws.  Under the federal Fair Labor Standards Act (FLSA) and comparable wage laws in most states, there is essentially a three-part analysis for determining whether an employee is entitled to be paid overtime:

• The employee must be paid on a salary basis, meaning the same weekly rate regardless of whether the employee actually works more or fewer hours than the employee’s scheduled standard (typically 40-hour) workweek;
• The nature of the employee’s work must satisfy one of several tests (g., administrative, executive, professional, computer or outside sales) for exempt status; and
• The employee must be paid a minimum weekly salary, which is set by regulations under the FLSA and some states’ laws.

To satisfy the third part of the analysis, therefore, employers need to consider how much people are paid.

FLSA Regulations Are Designed to Delineate Among Employees

Since January 1, 2020, the U.S. Department of Labor’s (DOL’s) regulations under the FLSA have required that employers pay their employees at least $684 per week ($35,568 annualized) to be classified as exempt.  The last effective increase to the FLSA salary threshold prior to that was in 2004, when it was set to $455 per week.  An attempt by the DOL in 2016 to more than double that to $916 was blocked by a federal district court, largely on the grounds that the increase was so substantial, relative to the salaries of large numbers of individuals who otherwise met the other two parts of the exemption analysis, that it “untethered the salary level test from its historical justification.”

Although the DOL does not use a precise formula that calculates the minimum exempt salary requirement in relation to the federal minimum wage, there remains a correlation between the two.  The purpose of including a weekly salary component in a determination of exempt status is to create a delineation between the “white collar employees” who the FLSA was designed to exempt, and other categories of workers.  If the federal minimum wage is significantly increased (under proposed legislation that seems to be perpetually pending in Congress), then employers should similarly assume that the amount of the minimum exempt salary requirement will also increase significantly to preserve the delineation between the two.

New York State Wage Laws Set a Direct Correlation

New York is among just over a handful of states (the others being Alaska, California, Colorado, Maine, Washington and Wisconsin) that sets its own, higher minimum salary thresholds that must be met to classify an employee as exempt.  This creates an incongruity for employers in the New York tri-state area.

While New York, Connecticut and New Jersey all have raised the state minimum wage to roughly similar levels, employees working in Connecticut and New Jersey can be classified as exempt (depending on the nature of their work) as long as they are paid the minimum federal salary exemption threshold of $35,568.  Employees working in New York must be paid much more to be classified as exempt from the state’s overtime requirements.

New York State employers currently cannot classify individuals as exempt unless they are paid a salary of at least $1,200 per week, for those in New York City and surrounding suburban counties, or $1,124.20 per week for those in the rest of the state.  This annualizes to $62,400 for New York City and surrounding counties, and $58,458.40 for the rest of the state.

After years of legislation that specified annual increases to reach these thresholds, current New York law mandates that the state Commissioner of Labor increase the monetary amounts of existing wage orders which, among other things, set the minimum exempt salary threshold, in proportion to increases in the hourly minimum wage.  New York’s minimum wage law currently is scheduled for additional increases in 2025 and 2026, with subsequent increases tied to regional inflation.

New York Employers Must Regularly Check Salary Compliance

In short, each minimum wage increase in New York State directly correlates to an increase in the minimum exempt salary threshold. New York employers that are not attentive to those increases, and fail to adjust employees’ salaries accordingly, may soon find that segments of their workforce have effectively been reclassified as non-exempt, overtime eligible workers.

By Tracey I. Levy