U.S. DOL Rule Raising Salary Threshold for Overtime Pay Exemption Goes Into Effect July 1st - What You Need to Know and How to Prepare

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As we told you a few weeks ago the U.S. Department of Labor issued a final rule on the overtime salary threshold opposed by our Chamber and the business community across the country. An anticipated lawsuit against the rule has not yet been filed. A similar attempt to drastically raise the overtime salary threshold during the Obama administration was struck down in the courts and the same is possible this time around. The Partnership to Protect Workplace Opportunity which includes the U.S. Chamber of Commerce and dozens of other business interest groups on May 9th urged the DOL in a letter to delay implementation from July 1st to September 1st. However, we urge all of our members to now prepare themselves to implement the new rule and not be caught flat footed in the circumstance the rule stands as is.

What is the overtime salary threshold? Non-exempt employees must be paid time and a half for any time worked past 40 hours a week. For an employee to be exempt from being paid overtime three conditions must be met:

An employee is paid a salary,
The salary is not less than a minimum salary threshold amount, and
The employee primarily performs executive, administrative or professional duties.

What does the new rule do? Simply put it increases the amount you must pay an employee to avoid paying time and a half for time worked past 40 hours a week along with a couple other changes. In brief the rule:

Starting July 1, 2024, about 6 weeks away, most salaried workers who earn less than $844 per week ($43,888 per year) will become eligible for overtime pay. And on January 1, 2025, that increases to $1,128 per week ($58,656 per year). The current threshold is $684 per week ($35,568 per year). As these changes occur, job duties will continue to determine overtime exemption status for most salaried employees.
The rule will also increase the total annual compensation requirement for highly compensated employees (who are not entitled to overtime pay under the FLSA if certain requirements are met) from $107,432 per year to $132,964 per year on July 1, 2024, and then to $151,164 per year on January 1, 2025.
Starting July 1, 2027, these earnings thresholds will be increased every three years automatically using DOL data.

What steps should I take now? Here is an actionable step-by-step guide from Bloomberg Law on how to go about complying with the new law. They are listed in brief below - refer to the full article for more guidance. Consult the DOL's compliance guide, your HR professional and/or employment law attorney if you require more detailed instruction.