US Labor Department expands OT eligibility for salaried workers

On Behalf of | Apr 30, 2024 | Employment Law -- Employer |

Starting July 1, significant changes to overtime pay eligibility for salaried workers go into effect, promising to impact most businesses in the United States significantly. The change represents one of the most substantial expansions in federal OT eligibility rules in decades.

In late April, the U.S. Labor Department announced a new rule requiring overtime pay for salaried workers in certain executive, administrative and professional roles earning less than $43,888 annually. The threshold increases again on Jan. 1, 2025, to $58,656.

The move comes roughly five years after the eligibility threshold increased from $23,660 to $35,568. Analysts estimate approximately 4 million lower-paid salaried employees will qualify for overtime within the first year, costing employers $1.4 billion.

The rule also expands eligibility for highly compensated employees

In addition to those earning lower salaries, the new rule affects overtime eligibility for nearly 300,000 higher-compensated employees. The current threshold of $107,432 for those workers rises to $132,964 on July 1 and then again on Jan. 1, 2025, to $151,164.

The Labor Department also changed the methodology used to calculate salary thresholds, which will be updated every three years based on then-current wage data. Critics say the new regulations are “heavy-handed,” arguing the regulations could saddle employers with excessive costs while other labor challenges persist.

Navigating regulations under the Fair Labor Standards Act

The Fair Labor Standards Act (FLSA) governs overtime pay requirements. It was enacted in 1938 and is one of the country’s oldest employment laws. Disputes involving FLSA regulations can be costly and time-consuming.

To prepare for the new overtime rules, employers need to review their payroll practices, reassess employee classifications and consider the financial implications of these changes. It’s advisable to work with experienced employment law attorneys who are knowledgeable about FLSA rules in order to comply with the new regulations.