New OT regulation brings reevaluation for employers/employees

A new overtime regulation has gone into effect that will affect millions of workers across the U.S., according to the Department of Labor (DOL).

Starting July 1, most salaried workers who earn less than $844 per week will become eligible for overtime pay under the final rule. Beginning Jan. 1, 2025, most salaried workers who make less than $1,128 per week will become eligible for overtime pay. To keep pace with changes in worker salaries, earnings thresholds will be updated every three years starting July 1, 2027.

The DOL regulation increases the minimum salary for most exempt employees from $35,589 to $43,888 annually. An increase to $58,656 is scheduled for January 1, meaning that most exempt salaried employees making less than the new threshold must be reclassified as non-exempt workers and paid overtime for hours worked over 40 per week.

Overtime is time and a half pay for each hour worked over 40 in a workweek. The Fair Labor Standards Act (FLSA) requires that when most workers work more than 40 hours in a week, they get paid more. According to the DOL, the new overtime regulation seeks to restore and extend the act for lower-paid salaried workers.

“The DOL’s new minimum salary requirement for the FLSA’s white-collar overtime exemptions requires employers to reevaluate the overtime-exempt status for many employees and forces employers to either increase salaries or convert employees who do not meet the new threshold to a non-exempt position now eligible for overtime pay,” Adam Long, an a ttorney in the Labor and Employment Group for McNees Wallace & Nurick LLC, statedin an email.

“The second significant increase scheduled to take effect on January 1, 2025, together with the pending court challenges to the DOL’s new rule, create additional uncertainty for both employers and employees. There exists a real possibility that the new rule ultimately will be struck down by the courts. This uncertainty makes compensation decisions and legal compliance even more difficult for employers in an already challenging environment,” added Long.

To determine if employees are exempt from overtime, employers must follow the FLSA. The FLSA salary threshold is the minimum salary employers must pay employees for them to be exempt from overtime wages. As the DOL administers and enforces the FLSA, the DOL determines the salary threshold.

Overtime protections have been part of the FLSA since 1938. Per the DOL, some workers are specifically exempt from the FLSA’s minimum wage and overtime protections, including bona fide executive, administrative or professional employees.

While the new DOL regulation changes the qualifications of an exempt employee, the threshold is one of three requirements that employees must meet for FLSA exemption. T he exemption also applies to the following:

• An employee is paid a salary.

• The salary is not less than a minimum salary threshold amount.

• The employee primarily performs executive, administrative, or professional duties.

The DOL first announced its new overtime rule - “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees” - on April 23, 2024.

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