The U.S. Department of Labor issued a final rule earlier this month that would expand overtime protections under the Fair Labor Standards Act for millions of workers across the country.
Are you up to date with the latest changes to the FLSA regarding overtime pay? If not, now is the time to learn about significant updates that could affect your business and how you compensate your employees.
A history lesson
Under the FLSA, all employees are entitled to overtime pay for hours worked in each work week over 40 hours. There is an exemption to that rule though if an employee satisfies several criteria.
First, the employee must be paid on a salary basis that is not subject to reduction based on the quality or quantity of work performed.
Second, the employee must earn a salary that is at least equal to the minimum-salary threshold established by DOL regulations.
Third, the employee’s job duties must primarily involve those associated with exemption: executive, administrative, professional, outside sales or computer employees. It is the second prong of this test that is getting a facelift in the DOL’s final rules.
Salary thresholds rising
Starting July 1, 2024, the salary threshold for exempt employees will increase from the current $684 per week ($35,568 annually) to $844 per week ($43,888 annually). This change means that employees earning less than this new amount generally will be entitled to overtime pay for any hours worked beyond 40 in a week—despite their exempt status under previous salary levels.
The threshold will see another hike on Jan. 1, 2025, to $1,128 per week ($58,656 annually). These adjustments aim to reflect current wage trends and the cost of living, ensuring that employees receive fair compensation for overtime work.
Regular updates expected
Beyond these immediate changes, starting July 1, 2027, the salary threshold will be updated every three years. These regular updates will be based on current wage data, helping to maintain fair labor standards that keep pace with economic changes.
What this means for employers
With these new rules in place, many employers will need to reassess which of their employees are eligible for overtime pay. The changes could impact payroll budgets and employee classification systems significantly.
Tip: Employers should begin preparations now to adjust their payroll systems and ensure compliance by the effective dates.
Understanding these updates is crucial for all businesses to avoid potential penalties and ensure that their employees are compensated fairly under the evolving standards of the FLSA.
For more information on the overtime rule and the recent change to the salary threshold, PIA Northeast members can click here.
Bradford J. Lachut, Esq.
Bradford J. Lachut, Esq., joined PIA as government affairs counsel for the Government & Industry Affairs Department in 2012 and then, after a four-month leave, he returned to the association in 2018 as director of government & industry affairs responsible for all legal, government relations and insurance industry liaison programs for the five state associations. Prior to PIA, Brad worked as an attorney for Steven J. Baum PC, in Amherst, and as an associate attorney for the law office of James Morris in Buffalo. He also spent time serving as senior manager of government affairs as the Buffalo Niagara Partnership, a chamber of commerce serving the Buffalo, N.Y., region, his hometown. He received his juris doctorate from Buffalo Law School and his Bachelor of Science degree in Government and Politics from Utica College, Utica, N.Y. Brad is an active Mason and Shriner.
