Public and private employers alike should be aware of the recent changes to employee overtime laws. On April 23, 2024, the U.S. Department of Labor announced a final rule (“the Final Rule”) entitled Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees which became effective on July 1, 2024. The Final Rule updates and revises the regulations issued under Section 13(a)(1) of the Fair Labor Standards Act by implementing an exemption from minimum wage and overtime pay requirements for executive, administrative, and professional (EAP) employees, in addition to updating the standard salary level and highly compensated employee total annual compensation threshold. The goal of this change, as outlined by the Department of Labor, is to address concerns regarding the current salary and compensation thresholds that were set in the 2019 rule, and to provide a timely update to the current levels.

Most significantly, the Final Rule increases the minimum salary level for overtime exempt employees, effective July 1, 2024. Previously, the standard salary level is $684 per week (equivalent to $35,568 per year), and the total annual compensation threshold for highly compensated employees is $107,432 per year. On July 1, 2024, the minimum salary level increased to $844 per week (equivalent to $43,888 per year), and the total annual compensation threshold is now set at $132, 964 per year. The Final Rule also provides for future updates to these levels, with the first increase occurring on January 1, 2025, and the subsequent increase happening on July 1, 2027, with updates every three years, based on available data and methodology.

In addition to the salary threshold increase, employees must also be employed in a bona fide executive, administrative, or professional capacity to be exempt from the FLSA’s overtime requirements. In order to fall within EAP exemption, the employee must meet three requirements:

  1. The employee must be paid a salary – which means 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;
  2. The employee must be paid at least a specified weekly salary level; and
  3. The employee must primarily perform executive, administrative, or professional duties, as provided in the Department of Labor regulations.

For the purposes of this test, the employer bears the burden of establishing the applicability of the exemption. Job titles and job descriptions do not determine EAP exemption status, nor does merely paying an employee a salary.

The attorneys at Fishel Downey regularly advise employers on issues relating to the Fair Labor Standards Act and relevant and related employment law policies and procedures. If you have a specific question or scenario, and would like assistance, contact one of the attorneys at Fishel Downey Albrecht & Riepenhoff LLP at 614-221-1216.