On April 23, the U.S. Department of Labor issued its widely anticipated rule updating the employee overtime exemptions under the Fair Labor Standards Act (FLSA). The new federal overtime rules marks a significant shift in how executive, administrative, and professional employees are classified. This change, effective July 1, 2024, raises the salary thresholds for exempt employees, entitling many employees to overtime pay who are currently exempt from overtime under the prior rule. It’s critical that employers understand and comply with this update.
Understanding the Changes
The final rule increases the standard salary level necessary for executive, administrative, and professional employees to qualify as exempt from overtime. Updated from 2019, the minimum salary level to qualify for overtime exemption has been raised from $684 to $844 weekly. Additionally, the salary threshold for highly compensated employee exemption also jumps from $107,432 to $132,964 annually. These adjustments aim to extend overtime protections to more workers, ensuring that salaries reflect current wage and inflationary trends.
Impact on Businesses
Employers need to review their payroll practices carefully to ensure compliance with the new federal overtime rules. Adjusting salary thresholds could mean that some employees, previously exempt, will now qualify for overtime pay if they work more than 40 hours a week. This has significant implications for staffing, budgeting, and administrative processes.
Compliance Strategies
In order to comply with the new federal overtime rules, employers should consider the following:
- Payroll Audit: Review your payroll practices and employee classifications to ensure they meet the new criteria.
- Financial Planning: Assess the financial impact of higher overtime costs or consider increasing salaries to maintain overtime exemptions.
- Training and Communication: Keep your HR team and managers informed about these changes. Proper training on compliance is crucial to avoid costly penalties and managing overtime costs.
Future Updates to the Minimum Salary Thresholds
The new federal overtime rules also introduce a mechanism for updating these salary thresholds every three (3) years, starting in 2027, requiring employers to stay vigilant and proactive in their payroll and overtime compliance strategies.
In light of these transformative updates to the FLSA overtime rules, taking proactive steps is essential. Contact FLB’s employment law attorneys in Allentown, PA for assistance with navigating these changes.
