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DOL Issues New Rule Making Millions of Employees Eligible for Overtime Pay

May 08, 2024

Employers…gear up for significant changes to overtime rules and salary thresholds in July 2024. Here’s what you should know.

Attention employers…big changes coming in July regarding overtime rules! The Department of Labor (DOL) has issued final rules, impacting the minimum standard salary level to be exempt from overtime and the highly compensated salary level effective July 1, 2024. Let’s dive into the incoming changes.

What is overtime pay under FLSA?

Overtime pay, under the Fair Labor Standards Act (FLSA), is 1 ½ times a non overtime exempt employee’s regular pay rate for every hour worked beyond 40 hours in one work week.

Under current rules, employees are exempt from the FLSA overtime requirements if they:

  • Satisfy the standard duties test
    • The employee’s job duties must primarily involve executive, administrative or professional duties.
  • Receive a minimum salary of at least $684 per week, or $35,568 per year ($107,432 for highly compensated employees HCEs)

What is changing?

Taking effect July 1, 2024, new rules increase the minimum salary required for an employee to be exempt from FLSA overtime requirements.

Here’s a look at the scheduled increases:

Salary thresholdCurrentMinimum salary beginning July 1, 2024Minimum salary beginning January 1, 2025
Standard salary level$684 per week ($35,568 annual)$844 per week (43,888 annual)$1,128 per week ($58,656 annual)
Highly compensated level$107,432 annual (including at least $684 per week paid on a salary or fee basis)$132,964 annual (including at least $844 per week paid on a salary or fee basis)$151,164 annual (including at least $1,128 per week paid on a salary or fee basis)

Hence, as of July 1, 2024, if your employee earns less than $43,888 per year, they must be classified as non-exempt and be paid time and a half for weekly hours exceeding 40.

Starting July 1, 2027, the minimum salary amounts for exempt status will be updated for wage inflation and then further updated every three years thereafter.

Are there exceptions to the salary requirements?

Outside sales employees, teachers, clergy, and employees practicing law or medicine are exempt from the requirements.

What should employers do now to prepare for the changes?

  • Review your current employee classifications. Do the new rules change who is exempt and non-exempt in your establishment?
  • If they meet the duties test, determine whether you need to raise certain employees’ salaries to meet the new exemption requirement—Would that be more economical than paying them overtime? If an employee works overtime on a regular basis, and his/her salary is closer to the new minimum ($43,888) you might want to raise his/her salary so you can retain the exemption.
  • Create a comprehensive strategy and training plan to communicate changes to all relevant parties including impacted employees, managers and stakeholders.
  • Be sure to update employee manuals and onboarding documents with the updated thresholds.

We recommend implementing changes to payroll closer to the July effective date, in case the ruling is challenged in court or modified by the Federal Department of Labor.

Need help reviewing your employee classifications and preparing for these changes? We can help. Contact us

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