You might already be aware that earlier this year, on February 14, 2024, the U.S. Department of Labor (DOL) announced that it would be releasing a new rule regarding overtime in April of this year. The proposed rule, which was announced in September, 2023, would significantly increase both the minimum salary for an exempt employee, and the minimum salary for an employee to be considered “highly compensated” for purposes of that exemption from overtime pay requirements.
While the proposed rule is being reviewed by the United States Office of Management and Budget (OMB), a division of the White House, we want to share with you specifics it’s expected to include when it is released.
What To Know About the Current Thresholds for Exempt Employee Compensation
”Exempt employees” are not required to get overtime pay (time and a half) for hours worked more than 40 in any one week.
The minimum salary for an exempt employee is $35,568 per year, which equates to $684 weekly.
Employees making the minimum salary, in order to be exempt, must also be employed in roles such as the following, each of which has its own guidance and requirements for proper classification:
- Computer workers
- Professionals with specialized expertise in a specific subject matter
- Administrative personnel
- Company executives
- Outside salespersons
The regulations contain a special rule for “highly compensated” employees who are paid total annual compensation of $107,432 or more. A highly compensated employee is deemed exempt under Section 13(a)(1) if:
- The employee earns total annual compensation of $107,432 or more, which includes at least $684 per week paid on a salary or fee basis (the balance can be paid through commissions, bonuses, etc.);
- The employee’s primary duty includes performing office or non-manual work; and
- The employee customarily and regularly performs at least one of the exempt duties or responsibilities of an exempt executive, administrative or professional employee.
For example, an employee may qualify as an exempt highly compensated executive if the employee customarily and regularly directs the work of two or more other employees, even though the employee does not meet all of the other requirements in the standard test for exemption as an executive.
How the New Rule Is Expected To Change the Handling of Employees’ Overtime Pay
The anticipated new rule regarding overtime is expected to increase the minimum salary threshold for an exempt employee, and the threshold for the highly compensated exempt employee. The minimum salary for an exempt employee is proposed to increase by nearly $20,000 per year to $55,000 or nearly $400 weekly to $1,059 (the 35th percentile of compensation to full-time, salaried employees). The minimum salary for the “highly compensated” employee exemption is proposed to increase from $107,432 to $143,988 (the 85th percentile of compensation to full-time, salaried employees). In addition, the proposed rule provides for automatic updates every three years
Understanding How the Rule Review and Implementation Process Works
The review process for regulations like these by the White House’s Office of Information and Regulatory Affairs (OIRA), a division of the OMB, is outlined in an executive order (EO). EO 12866 gives OIRA 90 days to review new rules. However, they can request an extension of that timeline.
If the review commenced upon the DOL’s announcement of the new overtime rule in mid-February of this year is extended, it’s plausible that it may not be completed until May or even later. In other words, the previously publicized April deadline may come and go without a final announcement of this new rule occurring.
Steps To Take To Ensure Compliance With the Impending New Overtime Labor Regulation
Should the salary thresholds increase as anticipated with the announcement of the new rule, the expectation is that potentially millions of workers may be impacted by the shift in policy perhaps as soon as June of this year. It’s important to note that once rules like these are formally announced, there is, typically, a transition period for employers to integrate new policies like these into their operations. You will want to evaluate staff pay and their roles and responsibilities to ensure they’re properly classified. At Wilson Ratledge, we have a lengthy history of working with businesses at all stages of their operations and can help you protect your company’s interests every step of the way. So, contact our law firm to learn more, and how we can best support you.