New Overtime Rule Raising Salary Thresholds for Exemptions

On April 23, 2024, the U.S. Department of Labor (DOL) finalized and released a big update to overtime rules under the Fair Labor Standards Act (FLSA), impacting how overtime rules are applied to salaried employees. Effective July 1, 2024, the standard salary threshold for employees exempted from overtime requirements because they primarily perform executive, administrative, or professional duties and earn at least the threshold amount will rise from $684 per week ($35,568 annually) to $844 per week ($43,888 annually). Subsequently, on January 1, 2025, it will further increase to $1,128 per week ($58,656 annually). Similarly, the threshold for “highly compensated employees” will increase from $107,432 to $132,964 annually on July 1, 2024, and then to $151,164 annually on January 1, 2025. If you think these new rules may apply to you, speak to an overtime and employment lawyer who understands the latest developments in wage and hour laws and rules today to ensure you understand what you are owed and that you are being paid at least the legally required overtime and/or salary under this new rule and all others.

These adjustments aim to keep pace with economic changes and ensure fair compensation for employees as both average prices and wages rise over time. Indeed, the final rule also introduces a mechanism for automatic updates to salary and compensation levels every three years, starting from July 1, 2027, reflecting evolving economic conditions.

While these changes are substantial and overdue rewrites of the salary thresholds, the new rule retains the existing job duties tests for exemptions, focusing solely on increasing salary thresholds to be more in tune with the modern economy. The DOL estimates that approximately 4 million workers will either become eligible for overtime or receive salary increases to maintain exempt status under these new thresholds.

Legal challenges are expected for this final rule, echoing the obstacles encountered by previous attempts by the DOL to increase salary thresholds via rulemaking. Previously, a federal court in Texas struck down a 2016 Obama administration rule that sought to elevate the standard salary level from $455 to $933 per week. Likewise, a challenge to a 2019 Trump administration rule, which raised the threshold to the current $684 per week and which was upheld by a Texas Federal District Court, is pending appeal in the Fifth Circuit. Concurrently, a Republican congressman has proposed legislation to prevent the Secretary of Labor from enforcing the rule, though its likelihood of passing before the final rule’s implementation is slim.

In an attempt to sidestep the legal setbacks faced by the 2016 rule, the current DOL has taken a more cautious approach than that rule. The final rule establishes the salary threshold at the 35th percentile of full-time salaried workers in the lowest-wage Census Region, the census region where salaries are the lowest, currently in the U.S. South, in contrast to the 40th percentile utilized in 2016. While lower than the 2016 rule, it represents a substantial upward departure from the 2019 rule, which relied on the 20th percentile for its calculations.

For salaried workers, understanding these changes could be crucial. On July 1, 2024, if you are a salaried worker who makes less than $43,888 annually your employer either owes you overtime or a raise. On January 1, 2025, the same applies to you if you are a salaried worker who makes less than $58,656 annually. If you believe you may be in this position, you should contact an employment lawyer who understands overtime and salary laws and rules to determine if these new overtime rules apply to you and if your employer owes you overtime and/or a raise. Further, given the potential for ongoing legal challenges and the evolving regulatory landscape, it’s essential that you have an experienced and engaged employment law attorney in your corner keeping abreast of the issue so you can ensure you are treated fairly and are paid any and all money you’re owed under these new rules.

Reach out to Sinapi Law Associates, Ltd. today at (401) 739-9690 to discuss your options with a dedicated and trusted Rhode Island employment law attorney.

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