Overtime provisions contained in the Fair Labor Standards Act (FLSA) require that most workers who put in more than 40 hours a week get paid 1.5 times their regular pay for the extra hours they work. Almost all hourly workers are automatically eligible for overtime pay. But workers who are paid on a salary basis are only automatically eligible for overtime pay if they earn below a certain salary. Above that level, employers can claim that workers are “exempt” from overtime pay protection if their job duties are considered “executive, administrative, or professional” (the “EAP exemption”).

To fall within the EAP exemption, an employee generally must meet three tests:

  • be paid a salary, (meaning that they are paid a predetermined and fixed amount that is not subject to reduction because of variations in the quality or quantity of work performed);
  • be paid at least a specified weekly salary level, and

In a recent rulemaking on April 23, 2024, the Department of Labor widened the number of salaried workers who are entitled to receive time-and-a-half pay for working more than 40 hours per week under the FLSA.

Currently, workers earning less than $35,568 per year are entitled to overtime pay, but this threshold will rise to $43,888 when the rule takes effect July 1, 2024 and then to $58,656 on January 1, 2025.

The final rule likewise increases the salary thresholds for the FLSA’s highly compensated employee exemption from $107,432 annually to $132,964 beginning on July 1, 2024, and $151,164 beginning on January 1, 2025. “Highly compensated employees” are employees who are exempt from the FLSA’s overtime requirements because of their compensation without consideration of the duties they perform.

The final rule also provides that these salary thresholds will increase automatically every three years, beginning on July 1, 2027.

Despite the final rule’s effective date of July 1, 2024, we expect the final rule will face court challenges that could delay or halt its coming into effect.

RESOURCE: See https://www.dol.gov/agencies/whd/overtime/rulemaking