The Department of Labor Has Expanded Salaried Workers Overtime Rule
The Department of Labor (DOL) has announced a final rule that will expand overtime access to millions of salaried workers. The updated rule defines and delimits who is a bona fide executive, administrative or professional employee exempt from the Fair Labor Standards Act’s overtime protections.
Annual Salary Threshold Increased
Effective July 1, 2024, the annual salary threshold for non-exempt workers will increase from $35,568 to $43,888. This increase is based on the methodology used by the 2019 overtime rule update. Another increase will occur on January 1, 2025, increasing the threshold to $58,656.
Beginning July 1, 2027, salary thresholds will update every three years by applying up-to-date wage data to determine new salary levels. The new rule will increase the standard salary level and highly compensated employee total annual compensation threshold. Below is a table outlining how the increases are to be scheduled out.
| Date | Standard Salary Level | Highly Compensated Employee 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. |
| After 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. |
| January 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. |
Key Provisions on Overtime Rule for Employers
The final rule comes after the DOL proposed the new overtime threshold in September of 2023, where the department conducted extensive engagement with employers, workers, unions and other stakeholders. The new overtime rule contains provisions requiring employers to:
- Expand overtime protections for lower-paid salaried workers.
- Give more workers pay or valuable time back with their families by better identifying which employees are executive, administrative or professional employees who should be overtime exempt. The final rule also ensures that employees who are not exempt receive time-and-a-half pay when working more than 40 hours in a week or gain more time with their families.
- Provide regular updates to ensure predictability. Establishing regular updates to the salary thresholds every three years to reflect the change in earnings will protect future erosion of overtime protections so they do not become less effective.
With the very likely litigious arguments that are to follow the final rule announcement and the fact that in 2016 a similar rule was successfully challenged and overturned; employers should start preparing now on how they will comply but remain cautious on rollout and implementation too far in advance of the deadline. Employers should review their employees’ current Fair Labor Standards Act (FLSA) exemption status compared to the July 1, 2024, changes and develop a plan on how each will need to be classified moving forward. Performing an audit of this nature in conjunction with an employment attorney is highly recommended.
Employers need to decide whether to raise the salary of those employees who earn above the overtime threshold under the old standard, but below the threshold under the new standard, so they remain exempt. If employers choose not to raise the salary of those employees, then they should be prepared to pay overtime.
If you have any questions regarding overtime eligibility for salaried workers, please contact the Brown Plus Human Resources Consulting Practice today!