he Fair Labor Standards Act (FLSA) requires employers to pay non-exempt employees an overtime rate of 1.5 times their regular rate for all hours worked over 40 hours per workweek. Starting July 1, 2024, the Department of Labor (DOL) will introduce a significant update to the overtime exemption rule. This change adjusts the minimum salary threshold for “white-collar” and “highly compensated employees,” with automatic updates every three years. For employers, particularly those in construction, engineering, and manufacturing, understanding these changes is crucial to ensure compliance and maintain smooth operations.

What are the Overtime Rule Exemptions?

White-Collar Exemption

To qualify for the white-collar exemption, employees must pass three tests:

Salary Basis Test: The employee must receive a fixed salary that isn’t subject to reductions based on work quality or quantity.

Salary Level Test: The employee’s salary must meet a minimum specified amount.

Duties Test: The employee’s job must primarily involve executive, administrative, or professional tasks.

Highly Compensated Employee Exemption

To qualify for the highly compensated employee exemption, employees must pass the same three tests, but the duties test is somewhat simplified. These employees must:

• Perform primary duties consisting of office or non-manual work.

• Regularly perform at least one of the exempt duties of an executive, administrative, or professional employee.

Steps for Compliance with the 2024 Overtime Rule

Step 1: Review Current Employee Status

Assess employment contracts and duties of employees classified as exempt. Make sure their roles align with the new thresholds and duties test requirements.

Step 2: Reclassify and Renegotiate

Identify employees who might need reclassification. Discuss necessary employment contract adjustments to meet the new thresholds and responsibilities.

Step 3: Work Closely with Your Payroll Department

Work closely with your payroll team to implement the new salary thresholds and compliance measures. This is key to avoiding any disruptions in employee compensation. Needless to say, if you mess up people’s pay, you have opened up a whole can of worms.

Step 4: Stay Informed

Keep updated on upcoming automatic changes to salary thresholds. Planning ahead will help you stay compliant and out of the courtroom.

Conclusion

Adapting to these new DOL regulations may seem like a big headache, but with thorough preparation and strategic adjustments, you can successfully navigate these changes and ensure your business remains compliant.

By understanding the new salary thresholds and duties tests, you can make informed decisions that benefit both you and your employees.

DISCLAIMER: We are here to help, but we do not give legal advice, nor do we claim to be legal advisors. Please consider partnering with an expert HR attorney who can give you tailored advice and ensure your business remains compliant with the evolving labor laws.

Download our Wage and Hour Law Basics PDF

For FAQs Regarding 7(i) Overtime Exemption for Commissioned Sales Employees, click here. 

For FAQs Regarding Commissions and the Administrative Exemption from Overtime, click here. 

Additional Sources

Department of Labor, Wage and Hour Division: Overtime Pay — This page details overtime pay requirements and upcoming regulations.

Federal Register, Overtime Exemption Updates: Notice of Proposed Rulemaking: Overtime Exemption — Official notice of changes to the overtime exemption rule, detailing new salary thresholds and duties tests.

Society for Human Resource Management (SHRM): Guidelines on Overtime Rules — SHRM provides advice on how organizations can comply with new overtime regulations.

National Federation of Independent Business (NFIB): Impact of Overtime Rule Changes — NFIB discusses the impact of overtime rule changes on small businesses and offers compliance strategies.