Department of Labor Changes Standards for Salaried Overtime

The United States Department of Labor will soon publish a Final Rule that increases the entitlement to overtime among salaried employees. This may affect a variety of ASA members’ employees by requiring overtime pay to certain employees who were not previously considered to be eligible for overtime.

The Fair Labor Standards Act (FLSA) requires covered employers to pay employees who work more than 40 hours in a week an overtime premium. That requires the employer to pay the employee at least 1.5 times the employee’s regular rate of pay for the overtime. There is an exemption for employees working in a bona fide executive, administrative, or professional capacity. The exemption is commonly referred to as the “white-collar” or executive, administrative, or professional (EAP) exemption. There is more than one element to the EAP test, but one of the elements is that the EAP employee must be paid a salary to be considered exempt from FLSA’s overtime requirements.

Under the new rule, the Department of Labor is establishing that the salary must meet certain minimum standards in order for the employee to be exempt from FLSA:

• Beginning on July 1, 2024, $844 per week or $43,888 annually for a full-year worker;
• Beginning on January 1, 2025, $1,128 per week or $58,656 annually for a full-year worker;
• As of July 1, 2027, and every 3 years thereafter, the salary required to be paid to an employee to be considered “exempt” from FLSA will be updated to reflect current earnings data.

Employees whose salary falls below the threshold will typically be considered “non-exempt” even if they otherwise meet the test to be considered an EAP (or exempt) employee.

A pre-publication copy of the final rule is currently available on the Department of Labor’s website. The new rule will become effective on July 1, 2024.