LOGIN Request a call

← BLOG  |  EMPLOYMENT LAW UPDATES  |  NEWS

DOL Overtime Rule Has Arrived

06 May

Share
Update Applicable to:Effective date
All employers with at least 1 “White Collar” Exempt WorkerJuly 1, 2024 – Applicable Rule for EAP.
January 1, 2025 Sections 541.600(a)(2) and 541.601(a)2) for HCE. 
July 1, 2027 Start of Triennial Update to Thresholds.


What happened?

On April 23, 2024, the Department of Labor (DOL) announced that the Overtime Rule is final and will modify the thresholds for the Executive, Administrative, and Professional (EAP), as well as the Highly Compensated Employees (HCE).


What are the details?

Increases salary level for EAP exemptions:

  • July 1, 2024: $844/week ($43,888/year)
  • January 1, 2025: $1,128/week ($58,656/year)

Increases salary level for HCE test:

  • July 1, 2024: $132,964/year
  • January 1, 2025: $151,164/year

The standard salary level and HCE total annual compensation will increase at the initial update on July 1, 2024, and then again on the applicability date for the new methodologies on January 1, 2025, and then every 3 years beginning on July 1, 2027.

Below is a summary of the main points that employers should consider, but reviewing the Final Rule is recommended:


EAP Exemption Status:

  • The employer is responsible for establishing the applicability of the exemption.
  • Job titles and descriptions do not determine EAP exemption status: It must meet the salary and duties test.
  • The new standard salary level, combined with the standard duties test, will better define which employees are employed in a bona fide EAP capacity.
  • This will ensure fewer lower-paid white-collar employees who perform significant amounts of nonexempt work are included in the exemption.


HCE Exemption:

  • The Department is increasing the earnings threshold for the HCE exemption.
  • The HCE test is a streamlined alternative for highly compensated employees.
  • The Department adopts its proposal to set the HCE threshold equal to the annualized weekly earnings of the 85th percentile of full-time salaried workers ($151,164). This change to the standard salary level methodology and the change to the HCE total annual compensation methodology will have a delayed applicability date.


Update Mechanism for Salary Increments:

  • A new updating mechanism is being established.
  • Subsequent triennial updates will apply the most recent four quarters of data to the standard salary and HCE total annual compensation levels in effect at the time of the updates.


To further help employers understand, the following is a breakdown of the salary thresholds in weekly, biweekly, semimonthly, monthly, and annual amounts. The smallest period to calculate the threshold remains weekly.

EAP Threshold Current As of July 1, 2024 As of January 1, 2025
Weekly $684 $844 $1,128
Biweekly $1,368 $1,688 $2,256
Semimonthly $1,482 $1,828.67 $2,444
Monthly $2,964 $3,657.33 $4,888
Annual $35,568 $43,888 $58,656


Business Considerations

  • Employers should familiarize themselves with the details of the DOL Overtime Rule, especially the EAP and HCE exemption thresholds; understanding the criteria for these exemptions is crucial as job titles or descriptions do not determine exemption status.
  • Employers should review the duties and compensation of their employees to ensure that they are correctly classified as exempt or non-exempt, especially with the new standard salary level in place.
  • With the increase in the standard salary thresholds, employers should plan for potential salary adjustments, particularly for the initial update on July 1, 2024, and the subsequent update on January 1, 2025.
  • Employers should monitor the automatic updates to the standards because these will occur every 3 years, starting from July 1, 2027. The methodologies used for these updates may change over time, so it is important to stay informed.
  • Employers should plan to communicate with their employees about these changes: transparency about how these regulations affect their employment status and compensation can help maintain a positive work environment and retain talent.
  • Given the complexity of employment law and the potential penalties for non-compliance, it is recommended to seek advice from an attorney who can provide guidance tailored to your specific situation.


Source References


Resources

Schedule a Call

Learn more about VensureHR and how we can make an impact on your business.

Contact VensureHR

This communication is intended solely for the purpose of conveying information. The present post might incorporate hyperlinks directing readers to websites managed by third-party entities. The inclusion of any links within this communication is meant to serve as points of reference and could encompass opinion articles from various law firms, articles from HR associations, official websites, news releases, and documents of government agencies, and other relevant third-party sources. Vensure has no authority over these external websites and bears no responsibility for their content. Furthermore, Vensure does not endorse the materials present on these websites. The contents of this communication should not be interpreted as legal advice or as a legal standpoint concerning specific facts or scenarios. Nor should it be deemed an exhaustive compilation of facts potentially pertinent to federal, state, or local laws. It is strongly advised that employers solicit legal guidance from an employment attorney when undertaking actions in response to any legal updates provided. This is due to the possibility of future alterations occurring in federal, state, and local laws, regulations, as well as the directives and guidelines issued by governing agencies. These changes may transpire at any given time, potentially rendering certain portions of the content within this update void or inaccurate.

Keep Your Business Compliant

Fill out the form below to receive monthly Employment Law Updates right in your inbox.

Keep Your Business Compliant

Fill out the form below to receive monthly Employment Law Updates right in your inbox.

Amazing!

You're all set.

Thanks for subscribing. Be on the look out for the Legal HR updates in your email.

Celebrating PEOs!

VensureHR joins the nationwide celebration, reflecting on an industry of excellence in providing payroll, employee benefits, compliance assistance, and HR services to thousands of SMBs across North America.

Tracking Convertion image