New Overtime Rules for Salaried Employees

On April 23, 2024, the Federal Department of Labor (DOL) released a final ruling to raise the minimum salary threshold for overtime compensation. This new rule outlines new overtime pay which occurs in stages.

The federal overtime provisions are outlined in the Fair Labor Standards Act (FLSA). Unless exempt, employees covered by the Act must receive overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular rates of pay. There is no limit in the Act on the number of hours employees aged 16 and older may work in any workweek. The FLSA does not require overtime pay for work on Saturdays, Sundays, holidays, or regular days of rest unless overtime is worked on such days.

Employees are exempt from the Fair Labor Standards Act’s minimum wage and overtime protections if they are employed in a bona fide executive, administrative, or professional capacity, as those terms are defined in the Department’s regulations at 29 CFR part 541. To fall within the EAP exemption, an employee generally must meet the following criteria:

• 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;
• be paid at least a specified weekly salary level; and
• primarily perform executive, administrative, or professional duties, as provided in the Department’s regulations.

The Department’s regulations also provide an alternative test for certain highly-compensated employees who are paid a salary, earn above a higher total annual compensation level, and satisfy a minimal duties test.

The first stage of the increase is to be effective on July 1, 2024 and will raise the salary threshold to $43,888 a year, or $844 a week in earnings. Most salaried employees who earn less than this amount will be eligible for overtime pay. Another increase is set to occur on January 1, 2025 to $58,656 a year, or $1,128 a week in earnings. Starting in July 2027, the eligibility threshold will be updated once every three years to reflect the changes in employee salaries representative of industry fluctuations. The increase in the salary threshold will allow more employees to benefit from overtime pay for their work.

Currently, a highly compensated employee who makes approximately $107,000 is exempt from overtime pay under the FLSA rules. The new ruling will increase that threshold to approximately $132,964 on July 1^st, 2024, and then to $151,164 on January 1^st, 2025.

We strongly encourage employers to review the status of their salaried employees to determine the applicability of the new ruling and what steps may be needed to remain in compliance.

For more information, please visit the U.S. Department of Labor website at https://www.dol.gov/agencies/whd/overtime.

As always, please contact our office with any questions.