What are the new Overtime rules for 2024?

December, 23 2024

One of the basic principles of the American workplace is that a hard day's work deserves a fair day's pay. Simply put, every worker's time has value. A cornerstone of that promise is the Fair Labor Standards Act's (FLSA) requirement that when most workers work more than 40 hours in a week, they get paid more. The Department of Labor's new overtime regulation is restoring and extending this promise for millions more lower-paid salaried workers in the U.S. The adjustments, prompted by the Department of Labor overtime rules (DOL), seek to provide overtime protections to millions of workers by altering the minimum compensation requirement and the Fair Labor Standards Act (FLSA) income level for 2024. This shift emphasises the significance of remaining current on legislative developments in order to preserve both legal compliance and a competitive advantage in attracting and retaining people.

The final rule addresses FLSA exemptions from overtime for executive, administrative, and professional employees.

The final rule also applies to employees covered under the highly compensated employee exemption (see the section below on highly compensated employee (HCE) exemption). To qualify for the exemptions from overtime for executive, administrative, and professional employees, an employee generally must:

• They are paid a salary, meaning that they are paid a predetermined and fixed amount that is not subject to reduction because of variations in the quality or quantity of work performed.
• Be paid at least a specified weekly salary level.
• Primarily perform executive, administrative, or professional duties, as provided in the DOL's overtime rules and regulations.

Effective July 1, 2024, executive, administrative, and professional employees must receive a minimum annual salary of $43,888 (or $844 per week) to satisfy the salary level test for overtime exemption, an increase from the previous threshold of $35,568 annually (or $684 per week). Effective January 1, 2025, this rate increases to $58,656.

Employees earning an annual compensation of at least $132,964 (formerly $107,432) are eligible for exemption under certain conditions. These conditions entail meeting an annual total compensation threshold, including receiving at least $844 per week paid on a salary or fee basis, having a primary duty involving office or non-manual work, and regularly performing one or more of the exempt duties associated with executive, administrative, or professional employees. Effective January 1, 2025, the compensation threshold increases to $151,164.

To ensure compliance with the new overtime rules in 2024, start by conducting a thorough audit of your payroll. Review each employee’s status to determine if they are eligible for overtime by examining job titles, descriptions, and salary information. This process involves a series of tests, including the salary basis test, the salary level test, and the duties test to confirm exemption eligibility.

While exempt employees are not eligible for overtime pay, nonexempt employees must keep track of their overtime according to the employer's time-tracking policy. This new rule has the potential to cause more employees to be classified as nonexempt, which means more employees will be required to start tracking the hours they work as well as their overtime. As an employer, you may want to reconsider how you track employee overtime and ensure that your processes are compliant with federal time-tracking regulations.

Conclusion

Employers need to understand the impact this new rule will have on their business. As the rule takes effect in July and next January in two phases, employers have to think ahead to ensure compliance with the regulations. Adapting to these new DOL overtime rules and regulations may seem like a big headache. Still, 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.