Changes to FLSA Overtime Requirements

by Kristen Duffeler

On April 23, 2024 the U.S. Department of Labor (the “DOL”) announced a new final rule, effective July 1, 2024, materially increasing the salary threshold for certain exempt employees.

Under the Fair Labor Standards Act (the “FLSA”), all workers are entitled to overtime pay for any hours worked in excess of 40 hours per week, unless a specific exemption applies.  Workers subject to an exemption are typically referred as exempt employees.

Among the exemptions contained in the FLSA are three “white-collar” exemptions: executive, administrative, and professional (“EAP Exemptions”).   To qualify for these exemptions workers must meet certain duty tests.  For example, to qualify under the executive exemption, typically the employee’s primary duty must be management of the company or a department or subdivision thereof; the employee must regularly direct the work of at least two or more other full-time employees; and the employee must have the authority to hire or fire other employees.  Relevant to the new rule, each of the EAP Exemptions also contains a minimum salary threshold that must be met.  The new rule materially increases this threshold.

In addition, the FLSA exempts certain “highly compensated” employees, without regard to any form of a duty test (the “HCE Exemption”).  The threshold for this exemption is also set to increase.

The new DOL final rule will make three key changes to the foregoing FLSA exemptions.  It will:

  • Increase the minimum weekly salary for EAP Exemptions from $684 to $844 per week, equivalent to an annualized increase from $35,568 to $43,888 per year, on July 1, 2024. This represents a 23.4% increase, and the threshold is set to increase further in 2025. On January 1, 2025, the threshold will increase to $1,128 per week, equivalent to $58,656 per year.
  • Increase the HCE Exemption threshold from $107,432 to $132,964 per year on July 1, 2024 and to $151,164 on January 1, 2025.
  • Provide for future updates to the salary thresholds every three years.

While these new thresholds may prove costly for employers, violations of the FLSA can be costly.  The FLSA provides for a range of remedies, including back pay, additional liquidated damages (up to an amount equal to the back pay), and penalties of up to $1000 per violation, as well as recovery of the affected employee’s attorneys’ fees.

When you need help determining which of your employees may be exempt, or have other questions about the FLSA and its implications for your company, Way Law is here to help!