An Important Update in FLSA Overtime Regulations
In April of 2024 the the U.S. Department of Labor issued changes to the salary test portion of the Fair Labor Standards Act. The first round of updates are approaching on July 1st, 2024. Here is what is key to know. Disclaimer: I am not am employee attorney so if you have challenging circumstances on setting exemptions please consult your counsel.
What is changing?
The minimum threshold used as the first step to determine overtime exemption is increasing. The schedule is below.
Current - $683/week ($35,568/year)
July 1, 2024 - $844/week ($43,888/year)
January 1, 2025 - $1,128/week ($58,656 /year)
~Additional increase are expected over the next three years
There will also be a change in the highly compensated test from $107,432 per year to $132,964 per year on July 1, 2024, and then to $151,164 per year on Jan. 1, 2025.
NOTE: If the salary test is met, and the highly compensated test is not met, the job duties tests will still need to be reviewed to determine a jobs final overtime exemption status.
What should be done?
The first thing you need to do is review your exempt employee populations wages to check for compliance against these new thresholds.
Verify your exempt employees are compensated above $43,888 annually.
Verify your exempt employees over $107,432 and under $132,964 are exempt as a result of one of the duties test verse the prior highly compensated threshold.
FYI - There is no need to reclassify or review non-exempt employee as a result of these regulations as they are already covered.
How do I proceed to make adjustments?
If you find that you have employees under the threshold you will need to make a determination to either reclassify them to non-exempt or increase their base pay to accommodate the new salary test.
If you have hands on technical, craft workers that previously fell above the highly compensated be sure to verify they pass a duty test to maintain exemption as well.
AGAIN: Remember that both the salary tests and a duty test must be passed to classify a job as exempt.
There is still a lot of vagueness in the regulations regarding duties tests and overall classification of exemption status. If you are in need of a more robust FLSA audit or if you need assistance reviewing your employees through this update I am here and happy to help.
