The U.S. Department of Labor issued a final rule April 23, 2024 making changes to the regulations about who is eligible for overtime pay.
Overtime pay protections are included in the Fair Labor Standards Act (FLSA) ensuring most workers with more than 40 hours a week get paid 1.5 times their regular pay for the extra hours they work. Almost all hourly workers are automatically eligible for overtime pay. But workers who are paid on a salary basis are only automatically eligible for overtime pay if they earn below a “certain” salary. Above that level, employers can classify workers as “exempt” from overtime pay protection if their job duties are considered executive, administrative or professional (EAP) – managers or other highly credentialed professionals.
Currently, workers earning $684 per week (the equivalent of $35,568 per year for a full-time, full-year employee) can be classified as “exempt” for overtime pay purposes.
The Department of Labor’s new final rule will phase in the updated salary threshold in two steps over the next seven months, and automatically update it every three years thereafter.
Effective on July 1, 2024, the salary threshold will be raised to $844 per week. This is the equivalent of $43,888 per year for a full-time, full-year worker.
Effective on January 1, 2025, the salary threshold will be raised to $1,128 per week. This is the equivalent of $58,656 per year for a full-time, full-year worker.
The salary threshold will automatically update every three years thereafter.
The starting point to comply should be to look at the exempt employees whose salaries fall between the current salary threshold ($35,568) and the proposed new thresholds. For each of those employees, employers should decide whether to increase their salary to keep them exempt or convert them to nonexempt. If employees are paid less than the new threshold, they must be paid 1.5 times their regular hourly rate for hours worked in excess of 40 in a workweek.
We encourage all members to examine the new rule and guidelines by visiting the U.S. Department of Labor Wage and Hour Division FAQ here.