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Monday, June 17, 2024

Time is Money: U.S. Department of Labor Raises the Bar on Overtime Exemptions

The U.S. Department of Labor (Department) has issued a final rule that changes the salary threshold necessary for white-collar employees to be classified as exempt from overtime requirements under the Fair Labor Standards Act (FLSA). For a white-collar employee to be considered exempt under the FLSA, the following three criteria must be met:

   (1) The employee must be paid a fixed salary;

   (2) The salary must meet a minimum specified amount; and

   (3) The employee must primarily be engaged in executive, administrative, or professional duties.

The overtime rule raises the salary-threshold levels in two phases. Beginning July 1, 2024, the threshold initially increases from $684 per week to $844 per week. The second phase begins January 1, 2025, at which time the threshold increases to $1,128 per week (equivalent to $58,656 per year).

But the increases don’t stop there. In drafting the rule, the Department recognized the need to update earnings thresholds regularly. As a result, the threshold will automatically increase every three years beginning July 1, 2027. The automatic increases are based upon wage data at the time of the update.

While lawsuits challenging the Department’s authority to increase the overtime threshold have been filed, it would be prudent for employers to examine the salaries of existing exempt employees and remain prepared to affect salary increases should those challenges fail. 

Post Authored by Kevin Sterk, Ancel Glink


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