Update 4/23/2024– Biden Administration has released the final proposed rule. See details here. Stay tuned for Federal Registry and obstacles. This has been made into effective.
Original Blog Post:
We have heard about the Department of Labor’s (DOL) proposed changes to the Fair Labor Standards Act exemption requirements for quite some time. Well, the final rule cleared review this month (April 2024).
So, what does this mean?
Background:
Last year, the U.S. DOL proposed changes to the overtime rule to increase the minimum annual salary threshold for exempt employee classification under the Fair Labor Standards Act (FLSA). The proposed changes to the overtime rule, if adopted, would increase the minimum annual salary threshold from $35,568 to $55,068 to qualify as an exempt employee. As a reminder, an exempt employee is one who is not entitled to overtime compensation for hours worked more than 40 in a workweek.
If adopted as proposed, the overtime rule changes would also provide automatic future updates every three (3) years. It would also potentially adjust the salary threshold for “highly compensated” employees.
Barring a few exceptions, employees must pass a duties test to be classified as exempt. The duties test must be passed even if wages exceed the minimum threshold. At this time, the proposed changes do not appear to impact the duties test requirements.
The exemption applies to workers employed as executives, professional, administrative, and outside sales employees, as well as some computer employees. The duties tests are based on the DOL criteria of each category.
How to prepare for the changes to the overtime rule?
Now that the rule has cleared review, it must be published in the Federal Register before it can take effect, which has yet to happen. Based on our research, we expect it to happen quickly (likely in April or May).
The terms of the final overtime rule are needed before employers can solidify any action plans. However, employers with exempt employees in the $45K-$60K range should prepare for changes. So, what can you start doing? We have listed three tips for getting started:
- Make a list of potentially impacted employees.
- Evaluate your overtime policy and reporting requirements to ensure they are accurate and compliant.
- Consider the duties of each potentially impacted employee.
We expect more updates in the near future, so stay tuned and contact your HR representative or legal counsel with questions.
Disclaimer: This is not legal advice.
