Key Updates to Overtime Regulations for 2024

The Department of Labor has made a final ruling on new overtime standards for non-exempt employees.

Effective July 1, the annual salary threshold for white-collar (executive, administrative, and professional) overtime exemptions will increase from $35,569 to $43,888, with plans to increase to $58,656 in 2025.

This two-part increase allows employers to make changes over time or to address both updates in one pay adjustment. The ruling also creates a three-year adjustment period, so employers can expect to see automatic increases every three years.

Who Is Exempt?

Employees that fall under “white collar” (executive, administrative and professional) are not eligible for overtime pay. To qualify for overtime pay, employees must be paid less than the threshold ($43,888) and not meet the duties tests (managing business operations, using discretion/independent judgement, managing employees directly, have advanced knowledge, ability to make hiring decisions etc.)

If employees fall into this category, they must be paid 1.5 times their regular hourly rate for any hours worked over 40 in one work week. The salary threshold also applies to managers and professionals that don’t earn at least $43,888 per year. It is important to look at job duties and not just titles when classifying employees and conducting the duties test.

Steps Forward

While the ruling is expected to be challenged, employers should start making plans now to comply with new standards. This can include budgeting for increases in pay/overtime, planning how to roll out new classifications, and deciding to follow the two-step increase or a one-time adjustment to comply for 2025. Employers should also be aware of any state and local wage and hour laws in addition to the federal FLSA update.

Keywords

• Exempt: Paid a salary, not eligible for overtime due to being classified as executive, professional, administrative, or outside sales.

• Non-Exempt: Eligible for overtime pay for any hours worked over 40/week. It can be paid salary or hourly. 

• Salaried: Individual receives the same salary from week to week regardless of hours worked. Non-exempt salaried employees will receive their regular salary plus overtime pay. 

• Hourly: Receives hourly wage for work performed, typically non-exempt.

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