DOL New Overtime Rule to Go into Effect July 1

On July 1, 2024, the Department of Labor’s (DOL) new federal overtime rule will go into effect. The new rule increases the salary threshold for employees who are exempt from overtime pay under the executive, administrative, and professional exemptions, commonly known as the “white-collar” exemptions. Currently, the standard salary threshold for these white-collar exemptions is $684 per week. The DOL’s new overtime rule raises the salary threshold for these exemptions to $844 per week (or $43,888 a year). The salary threshold will increase again on January 1, 2025, to $1,128 per week, or $58,656 annually.

The new rule also increases the salary threshold for the “highly compensated employee” (HCE) exemption. Under the DOL’s new rule, the minimum total annual compensation level for the HCE exemption will increase from the current rate of $107,432 to $132,964 on July 1, 2024, then to $151,164 on January 1, 2025. Thereafter, the new salary threshold for the white-collar exemptions and the HCE exemption will be updated every three years beginning July 1, 2027.

Under the Fair Labor Standards Act (FLSA), employees generally must be paid overtime – typically at a rate of 1.5 times the standard rate of pay – for all hours worked in a workweek in excess of 40, unless the employee falls under an exemption. To qualify for a white-collar exemption, an employee must not only be paid the new salary threshold, but also must meet three criteria: (i) be paid on a salary basis; (ii) be paid at least the designated minimum weekly salary; and (iii) perform certain exempt duties.

Any employee who performs certain exempt duties but is paid less than the new salary threshold under the white-collar exemptions will lose their exempt status and be eligible to receive overtime. As a result, employers must now determine whether to increase their salaries or reclassify these employees as eligible for overtime pay.

As it relates to HCEs, employers need to evaluate their employees within this category and determine whether salary increases are required in light of the new HCE threshold.

As expected, several business groups filed a lawsuit claiming the DOL exceeded its authority by setting the new salary threshold too high. While the new overtime rule is in legal limbo, employers should prepare for it to take effect as planned.

Contact the Labor and Employment attorneys at ThompsonMcMullan for further information and guidance regarding the DOL’s new overtime rule.