U.S. Department of Labor Finalizes New Rule Increasing Overtime Salary Threshold

On April 23, 2024, the U.S. Department of Labor (“DOL”) released a final rule, raising the salary threshold for certain overtime exemptions under the Fair Labor Standards Act (“FLSA”), the federal law establishing minimum wage and overtime pay, among other things.  Under the FLSA, employees who work more than 40 hours in a week must receive overtime pay of at least 1.5 times their regular rate.  That said, certain employees may be exempt from receiving overtime pay if they are employed in an executive, administrative, or professional capacity, are a salesperson, or are involved in computer programming.  

Currently, employees who work in such a capacity must earn more than $35,568 per year or $684 per week to be exempt from receiving overtime.  Additionally, highly compensated employees who currently earn $107,432 or more are exempted from receiving overtime, no matter the capacity in which they work. 

Under the new rule, which will go in effect on July 1, 2024, the salary threshold for employees in an executive, administrative, or professional capacity will increase to $43,888 per year or $844 per week.  This threshold will increase again to $58,656 per year or $1,128 per week on January 1, 2025.  The total compensation threshold for highly compensated employees will increase to $132,964 by July 1, 2024, and to $151,164 by January 1, 2025.  Beginning July 1, 2027, and every three years thereafter, the salary thresholds will increase automatically, using a methodology to be determined at the time of the increases. 

These increases are higher than what the DOL suggested back in August 2023 when it released a proposal of the rule and reflect a significant jump in the salary threshold for exempt employees.  Approximately 4 million employees will lose their exempt status which means their employers will have to start paying them overtime or increase those their salaries to maintain employees’ exempt status.

Individuals who believe that they have not been paid correctly or have been incorrectly classified as exempt from overtime under federal and/or State law should seek legal counsel to analyze their potential claims.