DOL Finalizes New Rule for Overtime Exemptions

On April 23, 2024, the U.S. Department of Labor (DOL) announced a final rule that significantly raises the salary threshold for overtime exemptions. This move marks the peak of efforts that began with a proposal in September, which faced resistance from certain Republican representatives and various business sectors.

Titled “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees,” the rule modifies criteria under the Fair Labor Standards Act. It specifies that bona fide executive, administrative, and professional employees will be exempt from overtime pay if their duties and earnings meet new, higher salary benchmarks.

Jessica Looman, Administrator of the DOL Wage and Hour Division, stated in a recent press briefing, “This rule not only reinstates but also expands overtime protections for lower-paid salaried workers, prevents the erosion of these protections in the future, and improves predictability for both employees and employers.”

Effective from July 1, 2024, the salary threshold for these exemptions will increase to $43,888 per year ($844 per week). This amount is set to rise even further on January 1, 2025, to $58,656 annually ($1,128 per week), using a new calculation method. This adjustment represents a substantial increase from the current weekly rate of $684, or $35,568 annually.

The updated rule for 2025 is expected to impact approximately three million workers and calculates the salary threshold at the 35th percentile of weekly earnings of full-time salaried workers in the lowest-wage Census region, namely the Southern United States.

Additionally, the salary threshold for highly compensated employees will rise to $132,964 in July 2024 and then to $151,164 in January 2025, aligning with the 85th percentile of national salaries for these positions. This is up from the current threshold of $107,432.

The rule also establishes a mechanism for automatic adjustments every three years, ensuring the thresholds remain relevant by reflecting the most recent salary data.

This significant update heralds major changes for businesses and employees alike, underscoring the need for all affected parties to stay informed about these developments as they continue to unfold.