On April 23, 2024, the U.S. Department of Labor (“DOL”) published a rule that expands overtime protections by raising the salary threshold for the Fair Labor Standards Act’s (“FLSA”) exemption for executive, administrative, professional, and computer employees and the total annual compensation level for the highly compensated employee exemption. This increase in the number of employees eligible for overtime goes into effect on July 1, 2024.

WHICH EMPLOYERS ARE COVERED:

The FLSA applies to ALL employers with at least two employees, or have annual sales totaling $500,000, or are engaged in interstate commerce. See here for a further explanation.

WHAT IS THE BASIC REQUIREMENT:

The FLSA requires that most employees be paid at least the federal minimum wage for all hours worked and overtime pay at not less than time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek. Please note that under the law, the definition of employee may also cover independent contractors; see here and here.

POSSIBLE EXEMPTIONS:

Section 13(a)(1) of the FLSA provides an exemption from minimum wage and overtime pay for bona fide executive, administrative, professional, and outside sales employees. Section 13(a)(1) and Section 13(a)(17) also exempt certain computer employees, including computer systems analysts, computer programmers, software engineers, and other similar skilled workers in the computer field. This exemption is commonly known as the “white-collar” exemption.

To qualify for one of these exemptions, an employee and certain “independent contractors” generally must

1. Be paid on a salary basis, meaning payment of a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (the salary basis test),
2. Be paid more than a specified salary threshold (the salary level test) in the law, and
3. Primarily perform executive, administrative, or professional duties as provided in the DOL’s regulations (the duties test).

More information about executive, administrative, professional, and computer employee exemptions can be found here.

Additionally, under the “highly compensated test,” certain employees are exempt from the FLSA’s overtime pay requirements if the employee

1. Is paid a specified amount in total annual compensation,
2. Receives a specified amount per week, paid on a salary or fee basis,
3. Performs office or nonmanual work, and
4. Customarily and regularly performs at least one of the exempt duties or responsibilities of an executive, administrative, or professional employee.

WHAT IS CHANGING:

Beginning July 1, 2024, the standard minimum salary level to qualify for the white-collar exemption is $844 per week (equivalent to $43,888 per year), and the highly compensated employee total annual compensation threshold is $132,964 per year (including at least $844 per week).

Further, beginning January 1, 2025, the standard minimum salary level to qualify for the white-collar exemption is $1,128 per week (equivalent to $58,656 per year), and the highly compensated employee total annual compensation threshold is $151,164 per year (including at least $1,128 per week).

For additional information about the content in this post or assistance with any questions about your business, the attorneys at Boodell & Domanskis are ready to help you. Contact us.