The U.S. Department of Labor (DOL) has proposed a substantial update to the minimum salary requirements for employees to be exempt from overtime pay under the Fair Labor Standards Act (FLSA). This proposed rule, introduced on August 30, 2023, has significant implications for employers and employees.
Who is Exempt?
Employees earning a salary of at least $35,568 per year ($684 per week) are exempt from overtime pay. However, the proposed rule seeks to raise this threshold to $55,000 yearly ($1,059 weekly). Additionally, Highly Compensated Employees exempt under the FLSA may see their salary threshold increase to $143,988 per year. With over 3.5 million salaried employees potentially losing their overtime exemption, the proposed rule could have far-reaching effects on the labor landscape.
What Should I Do?
Employers need to be proactive in preparing for potential changes resulting from the proposed rule. This involves assessing which employees may no longer qualify for overtime exemption if the rule is implemented. Employers should evaluate current salary structures, consider adjustments to ensure compliance and communicate transparently with affected employees. Employers can navigate these regulatory changes effectively by staying informed and taking preemptive action.
Test Guidelines:
To determine overtime eligibility, employees must pass three tests: the salary-level test, the salary-basis test, and the duties test. The salary-level test requires that employees earn a weekly salary meeting the minimum requirement set by the proposed rule. The salary-basis test mandates a fixed salary unaffected by work quantity or quality variations. The duties test assesses whether the employee’s responsibilities align with executive, administrative, or professional duties defined by the FLSA.
As 2024 progresses, the potential changes to overtime regulations remain a focal point for employers across industries. The proposed rule, if implemented, could reshape how employers classify and compensate their workforce. Employers can confidently navigate this regulatory landscape by understanding the nuances of the proposed changes and taking proactive steps to ensure compliance. Stay posted for further updates as the DOL finalizes these regulations, with a tentative date of April 2024.
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