Department of Labor Increases Threshold for Overtime Exemption  

The U.S. Department of Labor has issued a final rule that will increase the threshold compensation amounts for employees to be exempt from requirements for overtime pay. The rule goes into effect July 1, 2024.   Employees are exempt from the Fair Labor Standards Act’s minimum wage and overtime protections if they are employed in a bona fide executive, administrative, or professional capacity, as those terms are defined in DOL regulations.

To fall within the EAP exemption, an employee generally must meet three tests:

  • be paid a salary, meaning that they are paid a predetermined and fixed amount that is not subject to reduction because of variations in the quality or quantity of work performed;
  • be paid at least a specified weekly salary level; and
  • primarily perform executive, administrative, or professional duties, as provided in the Department’s regulations.

An alternative-exemption test will be available for certain highly compensated employees who are paid a salary, earn above a higher total annual compensation level, and satisfy a minimal duties test. The final rule will increase the standard salary level and the highly  compensated employee total annual compensation threshold on the rule’s effective date (July 1, 2024) and on January 1, 2025, when changes in the methodologies used to calculate these levels become applicable.

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