Final exempt overtime rule

On April 24, the U.S. Department of Labor announced a final rule, Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees, which updates and revises the regulations issued under section 13(a)(1) of the Fair Labor Standards Act implementing the exemption from minimum wage and overtime pay requirements for executive, administrative, and professional (EAP) employees. The rule has not yet been published in the Federal Register.

Earnings thresholds. Revisions include increases to the standard salary level and the highly compensated employee total annual compensation threshold, and a mechanism that provides for the timely and efficient updating of these earnings thresholds to reflect current earnings data. The final rule follows a Notice of Proposed Rulemaking that was published in the Federal Register on September 8, 2023.

The final rule will increase the standard salary level and the highly compensated employee total annual compensation threshold on the rule’s effective date of July 1, 2024, and on January 1, 2025, when changes in the methodologies used to calculate these levels become applicable. The final rule also provides for future updates of these levels every three years to reflect current earnings data. Rates in the final rule represent a slight increase from those included in the proposed rule.

Three-year updates. Thus, on July 1, 2024, newly revised 29 C.F.R. § 541.600(a) provides that the standard salary level threshold will become $844 per week (which DOL indicates is equivalent to $43,888 per year), compared to $684 per week ($35,568 annualized) prior to that date. On January 1, 2025, it will become $1,128 per week ($58,656 annualized). On July 1, 2027, and every three years thereafter, it will be updated in accordance with Section 541.607(b)(1).

On July 1, 2024, the standard salary level will equal $844 per week and HCE total annual compensation level will equal $132,964. On January 1, 2025, the standard salary level will equal $1,128 per week and the HCE total annual compensation level will equal $151,164. Currently, the HCE threshold is $107,432. It also adopts the mechanism to update the earnings thresholds every three years.

Other minimum salary amounts were changed as well.

“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,” said Acting Secretary Julie Su. “Too often, lower-paid salaried workers are doing the same job as their hourly counterparts but are spending more time away from their families for no additional pay. That is unacceptable. The Biden-Harris administration is following through on our promise to raise the bar for workers who help lay the foundation for our economic prosperity.”

“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,” said Wage and Hour Administrator Jessica Looman. “This rule establishes clear, predictable guidance for employers on how to pay employees for overtime hours and provides more economic security to the millions of people working long hours without overtime pay.”

The final rule will take effect on July 1, 2024.

Source: Written by Brandi O. Brown, J.D.

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