Big Changes for Overtime! What Employers Need to Know

Big Changes for Overtime! What Employers Need to Know About the New DOL Rule

May 21st, 2024

Millions of workers will soon be eligible for overtime pay under the new Department of Labor (DOL) regulations. This is a big deal for both employers and employees. Let’s break down what you need to know.

What’s Changing?

The Fair Labor Standards Act (FLSA) sets minimum wage and overtime requirements for most U.S. employees. Under the current FLSA rules, many salaried workers are exempt from overtime pay, even if they work more than 40 hours a week. This exemption applies as long as they are paid on a salary basis, meet a salary threshold, and perform certain job duties.

The new rule significantly increases the salary threshold required for the white-collar overtime exemptions. This means millions of workers who were previously exempt will now be eligible for overtime pay if they work more than 40 hours a week.

Key Dates:

July 1, 2024: The minimum salary for an exempt employee jumps to $43,888 annually.

January 1, 2025: The minimum salary for an exempt employee shoots up again to $58,656 annually.

Starting July 1, 2027: The salary threshold will be automatically adjusted every three years.

What Employers Need to Do Now:

State-Level Exemptions: Employers should consider state-level exemption tests, which may have a higher salary threshold than the FLSA. Your state may have its own laws that take precedent over this. For example, New York has higher salary limits.

Identify impacted employees: Figure out which of your currently exempt employees fall between the old and new salary thresholds.

Make a decision: Decide whether you’ll raise their salaries to meet the new threshold or reclassify them as non-exempt employees who are eligible for overtime.

Reclassifying employees? Be prepared: If you choose to reclassify employees, you’ll need to understand how to calculate their overtime pay, track their hours worked, and potentially adjust their benefits.

Communication is key: Develop a plan to communicate these changes to your employees clearly.

Train your managers and affected staff: Train managers on how to manage overtime costs and employees on their new rights and responsibilities.

Review exempt employees’ duties: Double-check that all remaining exempt employees meet the duties test for their exemption.

Possible Legal Challenges

The DOL’s previous attempt at a similar rule change was struck down in court. While the outcome of any legal challenges to this new rule is uncertain, it’s best to be prepared for it to go into effect as planned.