A critical component of the FLSA has been its overtime rules, which ensure compensation for eligible workers. According to the DOL, their objective with this new rule is to ensure lower-paid Americans get paid for the valuable time they dedicate to their work. In developing the new rule, the DOL conducted “almost 30 listening sessions across the country and the final rule was issued after reviewing over 33,000 written comments” (DOL Blog). These listening sessions included workers who wanted to ensure their time had value, specifically for the extra hours they were working.

 

The most important aspect of this ruling, specifically for employers, is the salary exempt threshold. In other words, the minimum salary an employee must earn to be considered exempt from overtime pay. Prior to July 1^st, the salary exempt threshold was $35,568 annually ($684 a week) – though some states were higher. Beginning July 1^st, the updated national threshold is $43,888 annually ($844 a week) – with a planned increase to $58,656 annually ($1,128 a week) beginning January 1^st, 2025. This is a significant increase which the DOL attributes to “long periods between increases”, specifically after 1975, which “caused an erosion of the real value of the salary threshold, lessening its effectiveness in helping to identify exempt EAP employees” (DOL Blog).

 

These changes have prompted considerable discussion and evaluation from organization leaders to ensure compliance. The notable exemptions to the FLSA rule are that:

• An employee is paid at least the minimum weekly salary threshold.
• An employee is paid on a salary vs. hourly basis.
• An employee meets the minimum duties test.

 

While the duties test has not changed with this ruling, it is often the most confusing for employers and requires an evaluation of job duties, scope of work, and level of oversight. The duties exemptions apply to “white-collar” workers who already meet the salary threshold requirements. A summary of the most common duties exemptions are as follows:

 

• Administrative Exemption: The employee’s primary duty involves managing part of an organization’s business operations. Their duties require a level of discretion and independent judgment/decision-making.
• Executive Exemption: The executive exemption applies to leaders whose primary duties involve managing the company or department and who regularly direct the work of at least two other full-time employees. They must also have the ability to hire, fire, and offer advancement opportunities to staff.
• Professional Exemption: The professional exemption is reserved for employees who require advanced knowledge to fulfill their duties, and who are engaged in work that is intellectual in nature. The advanced knowledge must be in the field of science and learning and must have been acquired from specialized coursework.

 

Employers have two primary options for those exempt employees that do not meet the updated salary threshold: to increase the salary to the updated threshold or to change those employees whose salaries do not meet the threshold to hourly non-exempt – meaning they will now be eligible for overtime pay. And just what is overtime pay? This is pay for hours worked beyond 40 hours per standard workweek and pay must be no less than 1.5 times the employees existing rate of pay (often referred to as “time and a half”). Employers should carefully consider adjusting currently exempt employees to non-exempt. They will need to ensure they have a plan for determining whether these employees will move from salary to salary non-exempt or to hourly, and if so, how to determine that hourly rate.

 

This may seem like a lot to manage, and it can be! Allow the Flex HR team to walk you through the nuances of this new rule, and to assist you with maintaining compliance. Reach out today to learn more about how we can support you!

 

Contact Flex HR today to be your HR support at info@FlexHR.com.