The U.S. Department of Labor (DOL) announced a final rule, defining and eliminating the exemptions for executive, administration, professional, outside sales, and computer employees. This will take effect on July 1, 2024. The final rule updates and revises the regulations issued under section 13(a)(1) of the Fair Labor Standards Act (FLSA) implementing the exemption from minimum wage and overtime pay requirements for these employees.
The revisions to the overtime exemption regulations include:
- Increases to the standard salary level
- Increases to the highly compensated employee total annual compensation threshold
- A mechanism that provides for the timely and efficient updating of these earnings thresholds to reflect current earnings data
Which Employees Are Exempt?
Employees are exempt from the FLSA’s minimum wage and overtime protections if they are employed in a bona fide executive, administrative, or professional (EAP) capacity. To be within the EAP exemption, an employee must meet three tests:
1. Be paid a salary, meaning they are being paid a predetermined and fixed amount that is not subject to reduction because of variations in the quality of work performed.
2. Be paid at least a specified week salary level.
3. Primarily perform executive, administrative, or professional duties, as provided in the department’s regulations.
The regulations also include an alternative test for certain highly compensated employees. These workers must be paid a salary, earn above a higher total annual compensation level, and satisfy a minimal duties test to qualify for the highly compensate employee exemption. This alternative pathway provides a different set of criteria for classifying highly paid workers as exempt from overtime requirements.
Key Dates To Note
The final rule will raise the standard salary level and the highly compensated employee total annual compensation threshold on two key dates. The first increase will take effect on the rules effective date July 1, 2024. A second set of changes for these thresholds will then become applicable on January 1, 2025.
The final rule includes a mechanism for regularly updating these earnings levels every three years. This will ensure that the exemption criteria keep pace with the current salary data over time.
Navigating Compliance With Labor Laws
Staying on top of ever-changing employment laws and regulations can be a challenge for small to mid-sized businesses. That’s why GMS’ team of HR experts are here to help! We closely monitor regulatory updates and provide guidance to ensure our clients remain compliant. By partnering with GMS, small business owners can focus on growth and success while we handle the complexities of workforce management. Contact our experts today!