New Overtime Rules Effective July 1

Overtime Rules Image

The U.S. Department of Labor recently announced new overtime rules titled “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees.” These rules will take effect on July 1, 2024. Here is what you need to know:

New Overtime Rules Purpose

The rule updates and revises the regulations for determining whether certain salaried employees are exempt from minimum wage and overtime requirements under section 13(a)(1) of the Fair Labor Standards Act (FLSA).  The exemption criteria will remain the same, but the salary level will increase.

Salary Level Increases

The final rule increases the standard salary level and the highly compensated employee total annual compensation threshold.  Please reference the chart here for effective dates and amounts.


Exemption Criteria

To fall within the EAP (Executive, Administrative, Professional) exemption, an employee generally must meet three tests:

  1. Be paid a salary, meaning a predetermined and fixed amount not subject to reduction based on work performance.
  2. Receive at least a specified weekly salary level.
  3. Primarily perform executive, administrative, or professional duties as defined in the Department’s regulations.

There’s also an alternative test for certain highly compensated employees who earn a salary above a higher total annual compensation level and satisfy minimal duties requirements.

Overtime Pay

Unless exempt, employees covered by the FLSA must receive overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular rates of pay.

Workweek Basis

An employee’s workweek is a fixed and regularly recurring period of 168 hours (seven consecutive 24-hour periods).

  • Different workweeks may be established for different employees or groups.
  • Averaging of hours over two or more weeks is not permitted.

What to do

The first step is to identify exempt employees who currently fall into the middle ground. Once you’ve done so, determine the employees’ typical weekly work hours. This may be easier said than done because the hours of many of these employees are not currently tracked. However, by analyzing an employee’s work schedule over a representative period, you can get some idea of the employee’s potential overtime hours. Then, compare the cost of a pay raise to reclassifying the employee as nonexempt and paying time-and-one-half for the employee’s overtime hours.

Employers have choices for handling employees with earnings in the middle ground between the current exemption threshold of $684 per week ($35,568 annually) and the July 1, 2024 increase to $844 per week ($43,888 annually).

  • Bump up an employee’s salary to maintain the exemption, or
  • Reclassify the employee as nonexempt and pay the employee overtime for hours over 40 in a workweek.

Think About Future Changes

As you are crunching the numbers for paying employees overtime, remember that the July 1, 2024, rate changes will only be in effect for six months. Therefore, you may also want to consider the impact when the thresholds increase on January 1, 2025.

The DOL provides guidance materials, fact sheets, online tools, and more related to overtime pay requirements on their website. You can access the Frequently Asked Questions here.

This rule aims to ensure fair compensation for employees and maintain labor standards. If you have further questions, feel free to reach out to us.