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Overtime Pay Changes Coming in July: 5 FAQs

June 18, 2024

Do you need to raise certain employees’ salaries to reach the new exemption requirements? Is the duties test impacted by the final rules? We answer these questions and more here.

Have you read our blog, DOL Issues New Rule Making Millions of Employees Eligible for Overtime Pay? There are big changes coming in July regarding overtime rules. Here are some frequently asked questions about the upcoming changes.

What is changing in July?

Taking effect July 1, 2024, new rules increase the minimum salary required for an employee to be exempt from FLSA overtime requirements. Check out our blog, DOL Issues New Rule Making Millions of Employees Eligible for Overtime Pay for the details.

5 FAQs about the new overtime rules

1. Why is the Department revising the exemption regulations? Since the last overtime change in 2019, wages for salaried workers have increased significantly, making the $684 per week salary level from 2019 less effective in defining the executive, administrative, or professional (EAP) exemption. This new rule updates the salary level test to better identify employees in EAP roles and ensure that overtime protections under the FLSA are fully enforced. Additionally, it restores the salary level's original function of shielding low-paid employees from the overtime exemption. The $844 per week ($43,888 annually) standard salary level is equivalent to the 20th percentile of salaried earnings in the lowest-wage Census region. The $132,964 threshold for highly compensated employees (HCEs) is equivalent to the annualized weekly earnings amount of the 80th percentile of full-time salaried employees.

2. Is the duties test impacted by the new rules? No, the duties test remains the same. Only the threshold amounts have been changed.

What else has not changed?

  • Salary basis not impacted- To fall within the exemption, an employee generally must 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.
  • Method for calculating overtime not impacted. Overtime pay, under the 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. If an 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. This means that hours should be tracked for all employees including those on salary.
  • No new examples of exempt work- Exempt workers include executive, administrative, professional, computer and outside sales employees.
  • No new limits on the amount of non-exempt work an exempt employee can perform- The rule remains that exempt employees can perform non-exempt work as long as their primary duties remain exempt.
  • No changes to the FLSA motor carrier act (MCA) exemption)- The Motor Carrier Act exemption is a provision in U.S. labor law that exempts certain employees who work in transportation, such as truck drivers and bus operators, from federal overtime pay requirements.

3. What is happening in January regarding overtime rules? There will be a big jump in January 2025. Starting January 1, 2025, the minimum salary for overtime exempt status will increase to $1,128 per week, or $58,656 per year. The highly compensated threshold will increase to $151,164 per year.

4. Are nonprofit organizations exempt from the final rules? The final rule affects nonprofits that make at least $500,000 in annual revenue or business. This only includes activities done for business purposes. Nonprofit activities like charity, religion, or education that don't compete heavily with other businesses are not counted. Employees of organizations not covered by the FLSA as a whole might still be protected if they are involved in interstate commerce. The Department's rules for Executive, Administrative, Professional employees don't have special rules for nonprofit or charitable organizations. Employees of these organizations must meet the same salary and job duty requirements as other employees to qualify for the overtime exemption.

5. Should you reclassify affected employees as non-exempt? If you have employees that won’t safely meet the minimum salary and exempt job descriptions, you’ll want to reclassify those employees. It is a surety that the Department of Labor will be doing examination audits of employers, and particularly in those industries that commonly treat employees as exempt.

June Landry CTA

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