A fair day's wage for a fair day's work -American Federation of Labor

The U.S. Department of Labor (DOL) established a new rule that changes the minimum salary threshold for employees to be “exempt” from overtime pay. Under the Fair Labor Standards Act (FLSA), the new thresholds will be phased in, with the first adjustment effective July 1, 2024, and then a second adjustment on January 1, 2025. Also, the rule establishes automatic increases every three years.

Below is a summary of the basic ideas to aid your understanding and further your discussions with an employment law expert or human resources professional. If you need a recommendation, see below, toward bottom.

In general, workers must be paid overtime for any hours worked over 40 hours per week. The overtime pay rate must be at least 1.5 times their regular pay rate.

Some workers are exempt from overtime pay. Salaried executive, administrative, or professional employees may be considered exempt. However, the salary must be above the minimum salary thresholds established under the FLSA.

Job duties and pay determine overtime exemption status for most salaried employees.

As of July 1, 2024, in order to be considered exempt from overtime rules, the employee must earn at least $844 per week, which is $43,888 per year. On January 1, 2025, the minimum earnings per week must be $1,128, which is $58,656 per year. Salaried employees earning less than these amounts will need to be paid overtime or have their salaries raised above the minimum threshold(s).

Highly compensated employees have different minimum salary thresholds to be exempt from overtime pay.

As of July 1, 2024, annual compensation must be at least $132,964 per year to be exempt from overtime. On January 1, 2025, annual compensation must be $151,164 per year to be exempt.

Are all businesses required to comply with the new overtime rules under FLSA?

Any business with two or more employees is covered by FLSA if:

• Annual sales are $500,000 or more

or

• Any hospital/facility providing medical or nursing care for residents

or

• Schools (for-profit or nonprofit)

or

• Public agencies

Note 1: Employees of employers not covered by the FLSA may still be entitled to its protections if employee activities include interstate commerce/work.

Note 2: There may also also be FLSA protections for domestic employees, such as housekeepers, cooks, and in-home childcare providers.

How often will minimum salary thresholds be adjusted?

The minimum salary thresholds will be updated every 3 years. The first scheduled update will be effective on July 1, 2027.

Next steps include identifying employees impacted by this change, reviewing their current classification, evaluating the cost of paid overtime versus increased salary, and defining internal procedures related to overtime approval. Please consult an employment law expert or human resources professional for assistance.

Please note that the FLSA does not preempt state or local laws that may provide greater benefits. These are minimums under federal law only. Please consult an expert to be sure you are in compliance with state and local employment laws.

DOL Resources

If you have questions and do not have an employment law expert or in-house HR professional, we recommend booking a consultation with HR Office Savers

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