WHAT EMPLOYERS NEED TO KNOW: U.S. Department of Labor’s New Overtime Rule

In the ever-evolving landscape of employment regulations, staying up to date of these changes is crucial for employers to maintain compliance and ensure equitable treatment of their workforce. One such development demanding attention is the recent regulation published by the U.S. Department of Labor in the Federal Register on April 26, 2024 increasing the standard salary level to assist in defining which salaried employees are entitled to overtime pay protections by the Fair Labor Standards Act (FLSA) effective July 1, 2024.

Under the FLSA, employees who work beyond 40 hours per week are entitled to additional pay unless exempted under the “EAP” exemption, which includes salaried employees meeting certain criteria such as earning above a specified salary threshold and performing executive, administrative, or professional duties. Currently, those who are eligible for overtime pay are salaried workers earning less than $684 per week or $35,568 annually. The adjustment ruled by the DOL, which becomes effective on July 1st, 2024, will increase the threshold to salaried workers who are earning less than $844 per week or $43,888 annually. This will again increase to salaried workers earning less than $1,128 per week or $58,656 annually on January 1st, 2025. Subsequently, starting in July 2027, the threshold will adjust every three years based on updated wage data.

The rise in the minimum wage and overtime eligibility threshold is a welcome change for many workers, offering them better compensation for their time and effort. However, for employers, this shift requires proactive measures to adapt and mitigate potential challenges, such as:

  1. Updating Payroll Systems: Ensure your payroll system reflects the new minimum wage and overtime eligibility levels.
  2. Reviewing Employee Classifications: Carefully review employee classifications to avoid misclassifying workers and facing potential legal consequences like back pay and penalties.
  3. Communicating Clearly: Transparently communicate these changes to your workforce. Explain how the updates affect them and answer any questions they may have.
  4. Investing in Compliance: Consider training HR personnel and supervisors on wage and hour laws to prevent future issues and promote a culture of compliance.

While court challenges have already been filed to stay the regulation, there have been several prior attempts to change the rates for exempt and non-exempt workers, as well as highly paid workers. The Department of Labor has relied upon various salary levels to promulgate its regulations. Levels promulgated during the Obama administration were stayed, and the subsequent administration abandoned the litigation, imposing its own lower levels. The current administration has returned to levels slightly below those of the Obama administration, but these could also be vulnerable to court scrutiny. The problem is that the court doctrine that provided that Federal agencies be treated by the courts as “subject matter experts,” the so-called “Chevron Doctrine” is itself under attack and has been questioned by current justices on the U.S. Supreme Court.  Thus, it is possible that this regulation will be similarly vulnerable.

The problem is that employers still need to prepare as though the rule will become fully effective because July 1st is simply not that far away from an administrative perspective. Employers are going to need to review their employees’ job descriptions and payroll levels to determine whether any job duties can fairly be characterized as falling within any of the exceptions to overtime rules.

For personalized guidance on navigating these changes, contact Friedman Schuman attorneys. Our experienced team offers expert advice tailored to your specific needs. Don’t wait for problems to arise; take proactive steps to ensure compliance and protect your business. Schedule a consultation with Friedman Schuman today.

To learn more, tune in to episode 14 of The Legal Way Podcast by Friedman Schuman: CLICK TO LISTEN.

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