By: Morgane Barry
The United States Department of Labor (“DOL”) revealed on April 23, 2024, a final rule amending the employer overtime pay exemption under the Fair Labor Standards Act (“FLSA”). FSLA mandates that employers compensate their employees with overtime pay for any hours worked beyond 40 hours in a week.
However, § 13(a)(1) of the FSLA exempts bona fide executive, administrative, professional, outside sales, and computer employees from overtime pay if they meet the following criteria:
· Receive a salary that is predetermined and fixed, irrespective of the quality or quantity of work performed;
· Earn at least a specified weekly salary level; and
· Primarily engage in executive, administrative, or professional duties.
The DOL raised the overtime exemption thresholds for both the standard salary level employees and highly compensated employees (“HCE”), establishing new methodologies to ensure timely and predictable adjustments. The aim of this regulation is to protect lower-paid white-collar workers and provide an efficient mechanism for updating earnings thresholds. The Secretary of Labor set the standard salary level threshold at the 35th percentile of weekly earnings of full-time salaried workers and the HCE threshold at the 85th percentile of full-time salaried workers.
The employee salary threshold timeline for changes are as follows:
Date | Standard Salary Level | HCE threshold |
Before July 1, 2024 | $684 per week / $35,568 per year | $102,432 per year with at least $684 paid per week |
July 1, 2024 | $844 per week / $43,888 per year | $132,964 per year with at least $844 paid per week |
January 1, 2025 | $1,128 per week / $58,656 per year | $151,164 per year with at least $1,125 paid per week |
If an employee’s wage falls below the new threshold, employers may either increase their salary to maintain exempt status or pay them overtime. Certain jurisdictions require employers to provide advance notice of pay changes or inform employees at the time of hire whether they are classified as exempt for overtime. Employers can still use nondiscretionary bonuses, incentive payments, and commissions to satisfy up to 10% of the minimum salary requirement, provided that the compensation is paid at least annually. The only pushback thus far stems from a federal judge temporarily blocking the final rule for government employees working for the State of Texas. The DOL anticipates that these modifications will prevent the loss of the real value of the salary threshold and increase the effectiveness identifying exempt employees.
If you would like to speak to an attorney about FLSA overtime exemptions and how it may affect you or your business, please contact Batoff Associates, P.A. at 410-864-6211.
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