New OT regulations introduce reassessment for employers/employees

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New overtime rules have gone into effect that will impact millions of workers across the United States, according to the Department of Labor (DOL).

As of July 1, most salaried employees earning less than $844 per week will be eligible for overtime under the final rule. As of January 1, 2025, most salaried employees earning less than $1,128 per week will be eligible for overtime. To keep up with changes in employee compensation, the earnings thresholds will be updated every three years, starting July 1, 2027.

The DOL rule increases the minimum wage for most exempt workers from $35,589 to $43,888 annually. The increase to $58,656 is scheduled for Jan. 1, meaning most exempt salaried workers earning less than the new threshold must be reclassified as nonexempt employees and receive overtime pay for hours worked beyond 40 per week.

Overtime is pay at one and a half times the normal rate for each hour worked in excess of 40 hours in a working week. The Fair Labor Standards Act (FLSA) requires that most employees who work more than 40 hours a week receive higher pay. The DOL says the new overtime rules are intended to restore and expand the law for lower-wage salaried employees.

“The Department of Labor’s new minimum overtime pay requirements for white-collar workers under the FLSA require employers to reevaluate the overtime-exempt status of many employees and force them to increase wages or transfer employees who do not meet the new threshold to a non-exempt position that currently qualifies for overtime pay,” said Adam Long,member of the Labor and Employment Group McNees Wallace & Nurick LLC, said in an email.

“The second significant increase, set to take effect on January 1, 2025, along with pending court challenges to the new DOL rule, creates additional uncertainty for employers and employees alike. There is a real possibility that the new rule will ultimately be struck down by the courts. This uncertainty makes decisions about wages and compliance even more difficult for employers in an already challenging environment,” Long added.

To determine whether employees are exempt from overtime, employers must comply with the FLSA. The FLSA salary threshold is the minimum wage that employers must pay employees to be exempt from overtime. Because the DOL administers and enforces the FLSA, the DOL sets the salary threshold.

Overtime protection has been a part of the FLSA since 1938. Under Department of Labor guidelines, certain workers are exempt from minimum wage and overtime protections under the FLSA, including bona fide managerial, administrative, and professional employees.

While the new DOL regulations change the qualifications for an employee exempt from the FLSA, this threshold is one of three requirements that employees must meet to be exempt from the FLSA.This exemption also applies to the following cases:

• The employee is paid a salary.

• The salary cannot be lower than the minimum wage threshold.

• The employee performs primarily managerial, administrative, or professional duties.

The Department of Labor first announced the new overtime rules — “Defining and Limiting Exemptions for Managerial, Administrative, Professional, Outside Sales, and Computer Workers” — on April 23, 2024.