In April 2024, the Department of Labor (DOL) issued a new Federal Overtime Regulations rule, significantly altering the “white-collar” exemptions and impacting businesses nationwide. This article covers what these changes mean for your business and how to ensure compliance.

The new overtime rule change, which took effect on July 1, 2024, has substantially increased the threshold annual salary of employees in leadership positions before they are exempted from overtime pay.

Which employees does this new federal overtime regulations rule affect?

Up until July 1, 2024, employees who fell under the Fair Labor Standards Act’s (FLSA) Exemption for Executive, Administrative, and Professionals (EAP) were not eligible for overtime pay as long as their threshold salary exceeded $35,568 a year.

The new rule increases that annual salary to $43,888. And on January 1, 2025, the threshold salary will increase again, to $58,656 annually.

The rule also increases the “highly compensated employee” total annual compensation threshold from $107,432 to $132,964 (and then $151,164 per year staring January 1, 2025).

According to the DOL release, salary thresholds will update every three years, starting July 1, 2027, by applying up-to-date wage data to determine what the new salary levels should be.

Which of my employees qualify as “white collar”?

The DOL has offered and explanation of the new Rule, a much-welcome sort of Cliff Notes to the nearly 400-page document (with a word count larger than Charles Dickens’ “A Tale of Two Cities”).

This summary gives the background on overtime regulations and defines which employees are exempt from OT provisions, particularly those falling into the EAP group. To qualify for those exemptions, employees must meet the following three criteria:

  1. They must be paid a salary, meaning that they are paid a predetermined and fixed amount that is not subject to reduction because of variations in the quality or quantity of work performed.
  2. They must be paid at least a specified weekly salary level.
  3. They must perform primarily executive, administrative or professional duties, as provided in the DOL’s regulations.

The new rule ups the figure for criterion No. 2 to a weekly pay is $844 (equivalent to the $43,888 annual salary noted above). The big takeaway for employers is that employees who do NOT meet the new salary levels are entitled to overtime after 40 hours/week. This is true even if they meet criteria No. 1 and No. 3. In short, it is now harder for employers to classify workers as belonging to the EAP group.

How will this impact my business?

It depends. Some states operate under more stringent state exemption laws than the federal standards. In New York, for example, An EAP employee’s salary threshold for exemptions increased from $900 to $1,300 per week effective March 13, 2024.

But in the remote/hybrid era, where workforces can be spread over many states, different rules may apply to different employees. It’s important to research the laws of each out-of-state employee on the payroll.

At Accu Data, we understand the complexities of the new overtime rule and will be following it as it continues to rollout. If you have questions or are looking for a professional service to help you navigate through your payroll and HR challenges, we’re here to help, and happy to offer a free consultation. Just contact us today!