Simplified Overview of the New Overtime Rule Effective July 1, 2024

The Department of Labor (DOL) has issued a new rule that updates the overtime pay exemptions under the Fair Labor Standards Act (FLSA) for executive, administrative, professional, and highly compensated employees. Here's what you need to know:

Key Changes

1. New Salary Thresholds:

   • For Executive, Administrative, and Professional Employees: Starting on July 1, 2024, these employees must earn at least $43,888 per year to be exempt from overtime pay. This amount will increase to $58,656 on January 1, 2025.

   • For Highly Compensated Employees (HCE): The threshold for this group will rise to $132,964 per year on July 1, 2024, and further increase to $151,164 on January 1, 2025.

1. Automatic Updates Every Three Years:

   • Beginning July 1, 2027, the salary thresholds for these exemptions will automatically adjust every three years. This is meant to keep pace with changes in worker salaries, giving employers a predictable schedule for future adjustments.

1. Unchanged Duties Test:

   • The criteria related to job duties for these exemptions remain the same. To be exempt from overtime, employees must still meet both the updated salary requirements and the existing job duty criteria.

Impact on Employers

These changes mean that many more workers will qualify for overtime pay unless their salaries are raised above the new thresholds. Employers need to prepare for these updates by reviewing and possibly reclassifying employees to ensure compliance with the new rules.

Employers should start by assessing their current exempt workforce, considering factors such as job roles, locations, and compensation levels. This will help them identify which positions will be affected by the new rule and allow them to plan accordingly.

It’s also crucial for employers to work closely with legal advisors to understand how these changes will impact their specific workforce and to ensure compliance with both federal and state laws.

Legal Challenges and Next Steps

Although the rule may face legal challenges and could be influenced by future political changes, employers should not assume that the rule will be overturned. The best approach is to prepare for the rule to take effect on July 1, 2024, with further changes on January 1, 2025.

To sum up, employers need to act now to review their workforce and make necessary adjustments to comply with the new overtime rules. Proper planning and legal consultation will be key to navigating these significant changes.