DOL Overtime Rule Raising Exempt Employees Salary Thresholds Is Now In Effect, by Aaron Solomon,Esq., Keith Gutstein, Esq., and Alisha Talati, Esq. 7-22-2024

The United States Department of Labor’s (DOL) final rule increasing the salary thresholds for certain overtime exemptions under the Fair Labor Standards Act (FLSA) is now in effect.  An estimated 4.3 million more salaried workers are now eligible for overtime under the new rule, which took effect July 1, 2024. The final rule updates and revises regulations issued under the FLSA that implement the exemptions from minimum wage and overtime pay requirements for executive, administrative, and professional (EAP) employees and highly compensated employees (HCE).

Under the FLSA, unless specifically exempt, employees covered by the Act must receive overtime pay for hours worked in excess of 40 in a workweek at a rate not less than 1.5 times their regular rate of pay. Employees are exempt as long as certain conditions are met. Generally, to qualify for an exemption, employees must satisfy the applicable test regarding their job duties and be paid on a salary basis and meet a minimum salary threshold. The new rule increases that minimum salary threshold for eligible employees.

Executive, Administrative, and Professional Workers

Under the final rule, the salary threshold for exemption for executive, administrative and professional workers will increase in two phases:

• Beginning July 1, 2024, the threshold for overtime exemption will increase from $35,568 ($684 per week) annually to $43,888 ($844 per week) per year.
• Beginning January 1, 2025, the threshold increases again to $58,656 ($1,128 per week) annually.

Highly Compensated Employees

The salary threshold for the highly compensated employee exemption will also increase in two phases:

• Beginning July 1, 2024, the threshold for overtime exemption will increase from $107,432 to $132,964.
• Beginning January 1, 2025, it will increase again to $151,164 per year.

Starting January 1, 2025, using the updated methodology finalized in the final rule, the standard salary level will use the 35th percentile of earnings of full-time salaried workers in the lowest-wage Census Region.

Starting July 1, 2027, salary thresholds will update every three years, by applying up-to-date wage data to determine new salary levels. According to the DOL, the largest numbers of impacted workers are anticipated to be in professional and business services, health care and social services, and financial activities, according to the Economic Policy Institute (EPI). The rule is already facing legal challenges including a lawsuit filed by the State of Texas, which resulted in a preliminary injunction to block the rule’s implementation for now. However, that injunction only impacts Texas state employees, not private employers. Kaufman Dolowich will continue to monitor developments. Employers should be aware individual states may have higher thresholds in place, which would normally supersede the federal thresholds.

Steps for Employers to Consider

Employers should consider the following with the new rule in effect:

• Auditing their existing workforce to see how they are classified (exempt vs. nonexempt);
• Assessing which employees may be reclassified as a result of the salary threshold increase;
• Reviewing existing timekeeping policies; and,
• Ensuring policies are in place for approval of overtime.