UPDATE: On April 23, 2024, the U.S. Department of Labor published the final rule, raising the salary thresholds under the FLSA’s “white-collar” and “highly compensated employee” overtime exemptions. Taking a staggered timing approach, the new rule provides as follows:
- Effective July 1, 2024, the salary threshold under the FLSA’s “white collar” overtime exemption for “executive, administrative, professional, outside sales and computer” employees will increase to the equivalent of an annual salary of $43,888 (which is currently set at $35,568 a year).
- Effective January 1, 2025, the salary threshold under the white-collar exemption will increase to $58,656.
- Effective July 1, 2024, the overtime salary threshold for highly compensated employees will increase to $132,964 (from $107,432 currently).
- Effective January 1, 2025, the overtime salary threshold for highly compensated employees will increase to $151,164.
These threshold amounts, which are higher than in the proposed rule, will update every three years, by applying then-current wage data.
Kleinbard’s employment attorneys are here to assist employers as they navigate these FLSA changes and the expected court challenges.
Get Ready: New Overtime Rules Are Around the Corner
The U.S. Department of Labor (DOL) is expected to publish new overtime rules that may impact whether your employees must be paid overtime. The final rule is expected by May.
Last year, the DOL published a proposed rule increasing the exempt salary threshold provisions of the Fair Labor Standards Act (FLSA). While it is uncertain what differences, if any, will be made between the proposed rule and the final rule, we do know that the final changes will be significant – the higher exempt salary threshold is expected to initially impact some 3.6 million workers. Preparing now for those changes makes good business sense.
Here’s what we know:
- The minimum salary threshold for white collar exemptions to the FLSA overtime law will increase. The current salary threshold that “executive, administrative, professional, outside sales and computer” employees must meet in order to be exempt from overtime is $684 per week. In the proposed rule, the DOL sought to increase this threshold to $1,059 per week ($55,068 annually). While the final rule may include a somewhat lower threshold, it will still likely be significantly higher than the current threshold.
- The threshold amount for “highly compensated employees” who are exempt from overtime laws will also increase. In the proposed rule, this threshold increased from $107,432 to $143,988 per year. Again, while we do not know if this threshold will increase by the amount proposed, we do know that this threshold will increase from the current amount.
- These thresholds are expected to automatically update every three (3) years with then-current wage data to maintain their effectiveness.
Under the proposed rule, for example, managers who make less than $55,068 per year will be required to be paid overtime for all hours worked over 40 hours in a workweek, regardless whether they meet the executive, administrative, professional, computer or outside sales duties tests. While retail, health care and manufacturing industries are expected to be largely impacted by this new rule, all employers should assess the possible impact to their business. Auditing employee compensation, duties and hours worked and developing a strategy for conversions from exempt to non-exempt are important first steps.
The attorneys at Kleinbard LLC’s Employment Group are available to help you undertake these human resources challenges to better prepare for the 2024 FLSA overtime changes.
