Under the FLSA, employers are generally obligated to pay overtime for any hours worked over 40 in a workweek. However, certain job classifications exempt some employees from this requirement. These exemptions typically apply to executive or administrative workers who meet specific salary thresholds and job duty requirements.
The Department of Labor (DOL) recently implemented a significant change that impacts overtime eligibility for many salaried employees. This update to the Fair Labor Standards Act (FLSA) increases the minimum salary threshold required for exemption from overtime pay. In simpler terms, more workers will now qualify for overtime compensation for hours worked beyond a standard 40-hour workweek.
The impact of the increased threshold
The basis of the DOL’s new ruling lies in raising the salary threshold for these exemptions. Previously, the minimum salary for exemption stood at $684 per week ($35,568 annually). The new rule implements a two-phase increase:
- Effective July 1, 2024: The minimum weekly salary for exemption will be $844 ($43,888 annually).
- Effective January 1, 2025: The threshold climbs even higher to $1,128 per week ($58,656 annually).
This increase will make many previously exempt employees eligible for overtime pay. Additionally, the DOL has included an automatic update mechanism to adjust the salary threshold every three years, helping to ensure it stays relevant to economic changes.
What employers should do
To navigate the new overtime regulations, employers should thoroughly review all employees currently classified as exempt. This can help identify those whose salaries fall below the new thresholds.
Employers ought to scrutinize their job duties for employees falling below the new salary threshold to help ensure they meet the exemption criteria beyond salary. This might involve duties like:
- Managing a team
- Exercising independent judgment
- Possessing specialized knowledge
Employers may also raise the salaries of exempt employees who fall below the new threshold to maintain their exempt status. This can help ensure continued overtime exemption and avoid potential disruptions to payroll and staffing.
For some employees, reclassification as non-exempt might be necessary. Employers should update their timekeeping systems and payroll procedures accordingly.
The DOL’s new overtime rules aim to help ensure fairer compensation for salaried workers. Employers must adapt to these changes by carefully reviewing employee classifications, considering adjustments and implementing new overtime tracking and pay procedures. Legal support can be valuable for navigating the nuances of these regulations and helping to ensure compliance.