department of labor updates overtime pay exemption requirements
On April 23, 2024, the United States Department of Labor issued a final rule updating the exemptions to its overtime pay requirements for executive, administrative, and professional (“EAP”) employees, and certain highly compensated employees. The final rule will go into effect on July 1, 2024. The final rule revises the annual compensation threshold required to be exempt from overtime pay requirements for EAP employees and certain highly compensated employees. Additionally, it creates a mechanism that provides for timely updates to those annual compensation thresholds to reflect current earnings data.
How the Rule Works
The Department of Labor’s overtime requirements identify certain types of employees who may be exempt from the requirements based on the employee’s job duties. The categories are as follows:
Executive employees are those whose primary jobs duties include the management of the business or one of its subdivisions, directing the work of two or more other employees, and authority over changes in other employees’ employment status, such as hiring and firing.
Administrative employees are those whose primary job duties include the performance of office or non-manual work directly related to management or general business operations, and who may exercise discretion and independent judgment for significant matters.
Professional employees are those whose primary job duties include the performance of work requiring advanced knowledge normally gained through specialized intellectual instruction, or that require invention, imagination, originality, or talent in recognized fields of artistic or creative endeavor.
Highly compensated employees are those employees who customarily and regularly perform one or more of the exempt job duties of an EAP employee and meet the annual compensation threshold set out in the Department of Labor’s regulations.
Current Salary Thresholds
The current salary threshold for EAP employees has been in effect since January 1, 2020. Prior to that, the threshold had not been updated since 2004, and before that, 1975. The current annual compensation threshold for exempt EAP employees is $684/week. For exempt highly compensated employees, the threshold is currently $107,432/year.
The New Salary Thresholds for Exemptions to Overtime Pay Requirements
The annual compensation threshold for exempt EAP employees under the final rule is as follows:
$844/week, starting July 1, 2024
$1,128/week, starting January 1, 2025
The annual compensation threshold for exempt highly compensated employees under the final rule is as follows:
Beginning July 1, 2024, $132,964/year, starting July 1, 2024
$151,164/year, starting January 1, 2025
Starting July 1, 2027, these thresholds will be updated to reflect the then-current earnings data. These changes do not affect current overtime pay exemptions for which there are no minimum salary requirements.
The Department of Labor’s overtime exemption requirements are full of additional technicalities that you need to be aware of when deciding whether an employee is entitled to overtime pay or not. If you have any questions regarding these changes or any other employment law issue, please do not hesitate to contact our attorneys, Bo Carpenter at bcarpenter@asklawnc.com or Matt Giangrosso at mgiangrosso@asklawnc.com.
