U.S. Department Of Labor Issues Final Overtime Rule

The U.S. Department of Labor (DOL) has released a final regulation updating the federal government’s overtime rules. The new regulation changes the salary threshold used to determine whether a worker is exempt from overtime pay so that, eventually, most employees earning less than $58,656 will be owed time-and-a-half wages for working more than 40 hours in a single workweek. (The current salary threshold is $35,568.)

Here is how the thresholds will change over the next several years:

• Before July 1, 2024: as noted above, currently most salaried workers who earn less than $684 per week, or $35,568 a year, are eligible for overtime. The highly compensated employee total compensation threshold currently is set at $107,432 per year.
• July 1, 2024-December 31, 2024: most salaried workers who earn less than $844 per week, or $43,888 a year, will be eligible for overtime. The highly compensated employee total compensation threshold will be set at $132,964 per year.
• January 1, 2025-June 30, 2027: most salaried workers who earn less than $1,128 per week, or $58,656 a year, will be eligible for overtime. The highly compensated employee total compensation threshold will be set at $151,164 per year.
• After July 1, 2027, and every three years thereafter: the DOL will determine thresholds by applying to the available data the methodology used to set the salary level in effect at the time of the update.

The DOL said that, as these changes take effect, job duties should be used to determine overtime exemption status for most salaried employees. Employees are exempt from these requirements if they are work in a bona fide executive, administrative, or professional (EAP) capacity. To fall within the EAP exemption, an employee generally must meet the following three tests:

• They are salaried, meaning that they are paid a predetermined and fixed amount that are not reduced due to variations in the quality or quantity of work performed;
• They are paid at least a specified weekly salary level; and
• They primarily perform executive, administrative, or professional duties, as provided in the DOL’s regulations.

The DOL’s regulations also provide an alternative test for certain highly compensated employees who are paid a salary, earn above a higher total annual compensation level, and satisfy a minimal duties test. Read more about this rule here and here.