The U.S. Department of Labor recently announced a final rule which significantly increases the salary threshold for employees to be exempt from the Fair Labor Standards Act’s (“FLSA”) overtime pay requirements.
With the increase in the salary threshold, more employees will be non-exempt under the FLSA, making them entitled to overtime pay and subject to the FLSA’s requirements to keep accurate records of time worked.
The FLSA entitles employees, unless specifically exempted, to overtime pay at the rate of 1.5 times their regular rate of pay for all hours worked in excess of forty hours in one workweek. To be exempt from the overtime pay requirement, an employee must (1) be paid on a salary basis, (2) be paid an amount that meets or exceeds the applicable salary threshold, and (3) perform job duties that qualify for an exemption, such as the executive, administrative, professional, and highly compensated employee exemptions. Employees who earn less than the salary thresholds are non-exempt and eligible for overtime, regardless of their position or job duties.
The salary threshold increases are scheduled to take effect July 1, 2024. The minimum salary threshold for employees qualifying as exempt under the executive, administrative, and professional exemptions increases from $684 per week ($35,568 per year) to $844 per week ($43,888 per year). This threshold is then set to increase again on January 1, 2025 to $1,128 per week ($58,656 per year). The rule also increases the minimum salary threshold for highly compensated employees from $107,432 to $132,964, and increases again on January 1, 2025 to $151,164 per year. Additionally, the rule includes a three-year automatic adjustment to the salary threshold based on current wage data.
Employers should use the enactment of this new rule as an opportunity to audit their exempt positions, review job duties and hours worked, analyze pay practices, and create a strategy to implement the rule while controlling overtime costs. For currently exempt positions that do not meet the new salary thresholds, employers must either increase the salaries of effected employees or reclassify effected employees to non-exempt status and pay them overtime. Employers should also be mindful of state and local wage and hour laws that may impose additional requirements beyond those under the FLSA.
The rule is subject to on-going litigation that may delay or prevent implementation of the rule. With the July 1 date quickly approaching, employers should nonetheless begin planning for the new rule to take effect. Please contact Rachel Felton or Neva Stotler of the Metz Lewis employment law group to learn more.
This post was written by Rachel Felton and Neva Stotler
