Overview of Proposed Changes to Overtime Exempt Salary Levels
On April 23, 2024, the United States Department of Labor published its final rule amending the overtime regulations under the Fair Labor Standards Act (“FLSA”). Specifically, the final rule increases the salary thresholds required for employees to be classified as exempt from overtime requirements.
New Thresholds and Effective Dates:
The new salary threshold increases will be implemented in two (2) phases.
The first salary threshold increase must take effect on July 1, 2024. The salary thresholds will be as follows:
- Executive, Administrative, and Professional Exemptions: $844 per week ($43,888 annually).
- Highly Compensated Employee Exemption: $132,964 total annual compensation.
The second salary threshold increase must take effect on January 1, 2025. The salary thresholds will be as follows:
- Executive, Administrative, and Professional Exemptions: $1,128 per week ($58, 656 annually).
- Highly Compensated Employee Exemption: $151,164 total annual compensation.
Impact on Businesses:
Employees earning below the new salary thresholds may be eligible for overtime pay, even if they meet the duties test for exempt status. It is crucial for employers to review and potentially adjust the classification of their employees to ensure compliance with the updated regulations. Employers should ensure that their payroll and HR systems are updated to reflect the new salary thresholds by the effective dates to avoid any compliance issues.
Non-compliance with the updated overtime regulations can result in costly penalties and legal repercussions for businesses.