Understanding the New Overtime Rule: What It Means for Workers and Employers
June 17, 2024
The Fair Labor Standards Act (FLSA) ensures most workers receive overtime pay for working more than 40 hours a week. The Department of Labor (DOL) has recently updated the FLSA’s overtime regulations, expanding coverage to millions of lower-paid salaried workers in the U.S.
On April 23, 2024, the DOL issued its final overtime rule, updating the FLSA’s requirements. The rule raises the minimum salary threshold for overtime pay in two stages:
- July 1, 2024: $844 per week ($43,888 per year)
- January 1, 2025: $1,128 per week ($58,656 per year)
Additionally, the rule increases the compensation level for highly compensated employees (HCE) to $132,964 per year on July 1, 2024. This threshold will further rise to $151,164 per year on January 1, 2025.
Starting July 1, 2024, most salaried workers earning less than $844 per week will be eligible for overtime pay. By January 1, 2025, this eligibility extends to those making less than $1,128 per week. Legal challenges are expected, but the rule is unlikely to be overturned quickly.
Certain employees, such as executive, administrative, or professional employees (EAP), are exempt from FLSA’s overtime protections. To qualify for this exemption, an employee must:
- Be paid a salary,
- Earn a salary above a minimum threshold,
- Primarily perform executive, administrative, or professional duties.
Since 1975, infrequent adjustments to the minimum salary threshold for EAP exemptions have reduced its effectiveness. The new overtime rule addresses this by significantly raising the threshold based on extensive public input.
The new rule reinstates overtime pay rights for many salaried workers, ensuring fair compensation and preventing overwork. Employers may consider raising the salaries of exempt employees to comply with the new regulations. If you have any questions regarding the new overtime regulations, please reach out to your LMC professional. At LMC, we are committed to helping companies navigate these regulatory changes. Our team is ready to provide guidance and support to ensure your business remains compliant.