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Overtime Rules Set to Change Again

Overtime Rules Set to Change Again Columbus, OH

The Department of Labor has issued a final rule increasing the salary levels that will be required for certain overtime exemptions under the Fair Labor Standards Act (FLSA). If your employees are impacted, these changes mean that you will either have to increase your employees’ salaries so that they remain exempt from overtime pay requirements, or you will have to reclassify them as non-exempt and begin paying them hourly and possibly overtime.

The FLSA generally requires that employers pay all of their employees at least minimum wage. Most employees are also entitled to overtime pay at the rate of 1.5x their regularly rate of pay for anytime over 40 hours that they work in a single week. However, certain employees are “exempt” from these requirements. In order for an employee to be exempt, they must meet certain salary level requirements, be paid on a salary basis, and their job duties must fit into certain categories. (Read Understanding Overtime: A Guide for Small Business.)

Under the new rule, the DOL is changing the salary threshold requirements for executive, administrative and professional employees (probably the most common category that we see small businesses and nonprofits rely on) as well as for highly compensated employees. Currently, the minimum salary that an executive, administrative, or professional employee can make and still be exempt from overtime is $35,568 per year (or $684 per week).

  • Beginning July 1, 2024, the salary threshold will increase to $43,888 per year (or $844 per week) for executive, administrative, and professional employees.
  • Beginning January 1, 2025, the salary threshold will increase again to $58,656 per year (or $1,128 per week) for executive, administrative, and professional employees.

Like any new rule changes, you can almost certainly expect the rules to be challenged in court, but now is a good time to assume that these changes will impact your salaried employees and plan accordingly.

  1. Do you have salaried employees who make less than $58,656 per year? If so, begin considering what it will cost to convert them to hourly, and how likely it is that they will work overtime. That will help you determine whether it would make more sense to raise their salaries to meet the new threshold.
  2. This is also a good time to review your wage and hour compliance. If you have employees that you have classified as exempt, we can review your determination to make sure that you are legally correct. One of the biggest mistakes we see here is ignoring the job duties portion of the test and simply assuming that if you pay employees a salary, they are automatically exempt from overtime.
  3. Similarly, this is a good time to review the records for your non-exempt employees. Are hours being properly tracked so that overtime can be paid where appropriate? Is there a policy in place for approving any overtime hours? We still see too many employers with blanket statements that they just don’t pay overtime, period. Unfortunately, the rules aren’t that simple.

As always, we will continue to monitor these and other proposed changes in the law for their potential impact on our small business and nonprofit clients. If you have questions about your HR policies and practices, don’t hesitate to schedule a consultation.

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