The U.S. Department of Labor (DOL) has introduced a Final Rule regarding overtime protections, announced on April 23, 2024. This rule will take effect on July 1, 2024. It's important to understand the impact of this regulation before it becomes enforceable this summer.
The Fair Labor Standards Act (FLSA) includes the federal regulations concerning overtime. Non-exempt employees under this law are entitled to receive overtime compensation for any hours worked beyond 40 in a workweek, at a rate no lower than one and a half times their regular pay rate.
Employees who are not defined as executive, administrative, or professional (EAP) employees will become eligible for overtime pay in addition to their salary once this final rule takes effect.
According to the rule, any hours worked beyond 40 in a week will warrant compensation at a rate of one and a half times the regular pay rate.
This legislation offers clear directives for employers regarding the fair compensation of workers for overtime hours. However, it also underscores the importance of accurately managing employee schedules and ensuring timely payment for overtime work. Failing to adhere to these regulations could result in significant financial consequences for your business, particularly if employees are working overtime with the expectation of receiving additional compensation.
Commencing July 1, 2024, salaried workers earning less than $844 per week (equivalent to $43,888 annually) will be entitled to overtime pay from their employer.
Effective January 1, 2025, the salary level will increase to $1128 per week. Put simply, salaried workers earning less than $1128 weekly (equivalent to $58,656 annually) after January 1, 2025, will qualify for overtime pay from their employer.
Executive, Administrative, or Professional Employee Exemption from Overtime Pay
This rule updates the previous regulations in section 13(a)(1) of the Fair Labor Standards Act (FLSA), which outlines how EAP employees are exempt from minimum wage and overtime pay rules. While EAP employees will still be exempt, the criteria for classifying the exempt employees has changed due to this final rule.
The updates involve increasing the salary level for EAP employees and adjusting the total annual compensation threshold for highly compensated employees. A new system will ensure these thresholds are updated promptly based on current earnings data.
There are three tests an employee must generally meet to be considered for the EAP exemption, which are listed below.
Receive a consistent salary.
Employees must receive a set amount of pay that doesn't change based on how much work they do.
Meet the minimum salary requirement.
They need to earn at least a certain amount of salary per week, as defined by the DOL.
Perform mainly executive, administrative, or professional tasks.
Their primary duties should involve these types of responsibilities, according to the regulations set by the DOL.
Certain highly compensated employees are offered an alternative assessment under the Department's regulations. To qualify, these individuals must earn a salary, exceed a higher total annual compensation level, and fulfill a minimal duties requirement.
The final rule will raise both the standard salary level and the total annual compensation threshold for highly compensated employees. These adjustments will take effect on July 1, 2024, and further changes will occur on January 1, 2025, coinciding with updates to the calculation methodologies below.
Additionally, the rule outlines a provision for periodic updates to these thresholds every three years, aligning them with current earnings data.
The DOL website features this graphic containing the present earnings data and data for the upcoming year. For further details, you can access the DOL website through the link provided below.
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