The Biden-Harris administration has finalized a rule that significantly increases the compensation thresholds for overtime eligibility, ensuring that millions of lower-paid salaried workers across the United States will receive fair compensation for overtime work.Background of the New Overtime Rule.
Today, the administration announced the introduction of a new rule that expands overtime protections by raising the salary thresholds required for exempting bona fide executive, administrative, or professional employees from federal overtime pay requirements. This change targets workers earning less than the new thresholds, aiming to correct pay disparities and ensure adequate compensation for long hours worked.
DOL overtime rule 2024. Details of the Salary Threshold Increases
Starting from July 1, 2024, the salary threshold for exempt workers will rise to $43,888 annually. This is an update from the current threshold of $35,568, set by the previous administration’s 2019 overtime rule update.
On January 1, 2025, this threshold will see a further increase to $58,656, following a new methodology that accounts for current wage data.
Additionally, there are plans to adjust the threshold for highly compensated employees, with a scheduled update every three years starting July 1, 2027, to ensure the thresholds reflect up-to-date wage trends.
| DATE | STANDARD SALARY LEVEL | HIGHLY COMPENSATED EMPLOYEE TOTAL ANNUAL COMPENSATION THRESHOLD |
|---|---|---|
| Before July 1, 2024 | $684 per week (equivalent to $35,568 per year) | $107,432 per year, including at least $684 per week paid on a salary or fee basis. |
| July 1, 2024 | $844 per week (equivalent to $43,888 per year) | $132,964 per year, including at least $844 per week paid on a salary or fee basis. |
| January 1, 2025 | $1,128 per week (equivalent to $58,656 per year) | $151,164 per year, including at least $1,128 per week paid on a salary or fee basis. |
| July 1, 2027, and every 3 years thereafter | To be determined by applying to available data the methodology used to set the salary level in effect at the time of the update. | To be determined by applying to available data the methodology used to set the salary level in effect at the time of the update. |
Statements from Administration Officials
Acting Secretary Julie Su emphasized the administration’s commitment to fair labor practices, stating, “This rule will restore the promise to workers that if you work more than 40 hours in a week, you should be paid more for that time.” She highlighted the unfairness faced by lower-paid salaried workers who often work longer hours without additional pay, comparing them unfavorably with their hourly counterparts.
Wage and Hour Administrator Jessica Looman added, “The Department of Labor is ensuring that lower-paid salaried workers receive their hard-earned pay or get much-deserved time back with their families.” She noted that the rule not only expands overtime protections but also establishes clear guidelines for employers on compensating overtime, thus enhancing economic security for millions.
ALSO READ. What does Walmart mean and why is the store called that?
Impact on Workers and Employers
The DOL overtime rule 2024 is designed to benefit workers by:
- Expanding overtime protections to more salaried workers who earn below the new thresholds.
- Ensuring that non-exempt employees are compensated at time-and-a-half for working more than 40 hours per week, or alternatively, allowing them more personal time.
- Regularly updating salary thresholds every three years to keep pace with wage growth, thus maintaining the effectiveness of overtime protections.
Looking Forward
The final rule, effective July 1, 2024, was developed after considering over 33,000 comments from a range of stakeholders, including employers, workers, and unions. This extensive engagement underscores the rule’s importance and the administration’s dedication to ensuring that the rights of workers are preserved while fostering a fair and equitable work environment.
For more information on the specifics of the new overtime rule and how it may affect you or your organization, visit the Department of Labor’s official website where further details and guidance are available.
What is the Department doing in this rule?
This rulemaking 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). Employees are exempt if they are employed in a bona fide executive, administrative, or professional (EAP) capacity as those terms are defined in the Department of Labor’s regulations at 29 CFR part 541. This exemption from the FLSA is sometimes referred to as the “white-collar” or “EAP” exemption.
What is the FLSA’s EAP exemption?
Section 13(a)(1) of the FLSA exempts individuals employed in a “bona fide executive, administrative, or professional capacity” from the Act’s minimum wage and overtime requirements. The FLSA instructs the Department to issue regulations that define and delimit the EAP exemption; those regulations are located at 29 CFR part 541.
What determines if an employee falls within the EAP exemption?
Currently, to fall within the EAP exemption, an employee generally must:
- 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 (the “salary basis test”);
- be paid at least a specified weekly salary level (the “salary level test”); and
- primarily perform executive, administrative, or professional duties, as provided in the Department’s regulations (the “duties test”).
Certain employees, such as doctors, lawyers, teachers, and outside sales employees, are not subject to either the salary basis or salary level tests; employees in these occupations may fall within the EAP exemption regardless of how and what they are paid. The
Department’s regulations also provide an alternative test for certain highly compensated employees (“HCEs”) who are paid a salary, earn at least a higher total annual compensation level, and satisfy a minimal duties test.
