The U.S. Department of Labor (DOL) published the new final rule governing overtime pay eligibility for workers under the federal Fair Labor Standard’s Act (FLSA).  The rule governs the minimum salary threshold for being an exempt worker.  As of July 1st 2024, the threshold will be $43,888, up from $35,568. The exemption threshold will rise again to $58,656 on January 1st, 2025:

How Many Workers Will Be Affected By New Overtime Rules? 

The DOL final rule estimates that approximately 1 million employees earning between $684 and $844 per week will be affected initially in July 2024, with larger impacts after the first standard salary level update. The rule will raise earnings for the workers affected, or as the government describes it will transfer more income to the employees. 

As of January 2025, when the second raise of minimum salary for overtime exemption rises to $58,656, the DOL estimates 3 million employees will be affected. These are workers who earn at least $844 per week but less than the new January 2025 standard salary level of $1,128 per week. 

The result of the two increases to minimum salary for overtime exemption, the combined effected is estimated affect 4 million workers. This new salary level aims to ensure that more lower-paid white-collar workers who perform significant amounts of nonexempt work are included in the exemption. 

The update also raises the total annual compensation threshold for highly compensated employees to $151,164. The rule estimates that about 292,900 employees who currently meet the HCE criteria but do not satisfy the standard duties test will be affected by this increase. If their employers do not adjust their salaries upwards to meet the new threshold, these employees’ exemption status will revert to being determined by the standard duties test. 

Background History of DOL FLSA Overtime Exemption Rulemaking: 

 The FLSA mandates a minimum wage and overtime pay for employees working over 40 hours a week, except for those in “executive, administrative, or professional (EAP)” roles, known as the “white-collar” exemption.

The Secretary of Labor has the authority to define and refine what constitutes EAP exemption. This authority has been in use since the original Act in 1938 and detailed through regulations since 1940. Three tests determine EAP exemption: a fixed salary basis test, a salary level test with a minimum specified amount, and a duties test focusing on executive, administrative, or professional tasks. 

The final rule just released sets new compensation thresholds for both the standard salary level and the highly compensated employee (HCE) tests. The standard salary level is set at the 35th percentile of weekly earnings for full-time salaried workers in the lowest-wage Census Region ($1,128 per week). The HCE threshold is set at the 85th percentile of full-time salaried workers nationally ($151,164 annually). 

The new final rule aims to more accurately define who qualifies as EAP exempt, thus better identifying employees who should be entitled to overtime. Included is a provision for updating the earnings thresholds to ensure they remain effective. The first update will occur in July 2024, and then every 3 years after. 

Unpaid Overtime Law Firm

If you believe you are not being paid for all of the time you have worked, or are not being paid the overtime due to you, we invite you to schedule a consultation with an employment law attorney at our offices. Schneider Wallace Cottrell Konecky LLP is a national law firm that represents employees in a wide range of employment law cases, including class action lawsuits involving the failure to pay wages, overtime pay and commissions. Contact us at 1-800-689-0024 or info@schneiderwallace.com.