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Department of Labor – Final Overtime Rule
After receiving some 33,000 comments on the September, 2023 Proposed Overtime Rule, The United States Department of Labor (DOL) announced the final rule increasing the salary threshold to qualify for an exemption to overtime pay under the Fair Labor Standards Act.
The new rule presents three major changes:
First, the salary threshold for the “white collar” employee exemptions will increase from $35,568 per year ($684 per week) to $43,888 per year ($844 per week) beginning July 1, 2024. On January 1, 2025, the threshold increases to $58,656 per year ($1128 per week).
Second, the Highly Compensated Employee (“HCE”) exemption will increase from $107,432.00 annually to $132,964.00 annually effective July 1, 2024. This threshold will increase to $151,164.00 annually on January 1, 2025.
Third, beginning July 1, 2027, there will be automatic updates every three years from that date forward.
There are no changes to the “duties” tests for the white collar exemptions. Therefore, continue to apply the applicable duties test to determine whether your employees meet the administrative, executive, professional and computer exemptions. As before, always ensure that any deductions from a salary exempt employee’s salary is consistent with the salary basis test and that all of the other salary basis requirements are also met.
We expect this rule to face legal challenges in the courts. Many of you will recall the challenges to the Obama Administration’s 2016 rule that resulted in a nationwide injunction and the rule never being implemented. However, we cannot presume the same outcome for this new rule.
Therefore, since July 1, 2024 is less than three months away, now is an excellent time to review your exempt workforce vis-à-vis their duties and salaries. Where challenges are identified, whether it is in the duties test or salary threshold, then a focused and pointed analysis will need to occur and strategies will need to be devised to ensure that the current exempt employees are meeting the current and new requirements. If previously exempted employees now become non-exempt, care must be taken in restructuring their hourly pay and entitlement to bonuses, etc. to ensure that all state as well as federal laws are being complied with. Additionally, overtime policies will most likely need to be reviewed and updated.
As usual, the labor and employment law attorneys at RBS are here to partner with you and assist in employee classification audits or strategies for complying with the new rules.