Department of Labor Introduces Final Rule on Employee Overtime Exemptions

As we’ve said frequently over the last decade, with changing administrations come changing policies.  It’s taken a while to get here, but the Biden administration has finally gotten to some of the labor laws we expected to be changed early on in his presidency.  In a strong departure from the previous administration’s less employee-friendly policies, the Department of Labor has issued a final rule on overtime exemptions for employees working in bona fide executive, administrative or professional (EAP) occupations.

As a reminder, to fall within the EAP exemption, an employee must meet three tests:

  1. 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;
  2. be paid at least a specified weekly salary level; and
  3. primarily perform executive, administrative, or professional duties, as provided in the Department’s regulations.

Prior to this rule, which takes effect July 1, 2024, the minimum salary level was $684 per week, or $35,568 per year.  However, beginning in July, that minimum gets bumped up to $844 per week or $43,888 per year .  On January 1, 2025, the minimum salary will rise to $1,128 per week, or $58,656 per year.  As a special addition to the rule, beginning in July 2027, and every three years after that, the minimum salary will be adjusted based on available data at the time of the adjustment.

In the near future, this rule probably doesn’t mean much to a lot of employers or full-time, salaried workers.  However, by the end of the year, employers will have to ensure that all salaried employees’ wages meeting a much higher threshold in order to qualify for the overtime exemption.  That being said, the time is now for any employer required to negotiate salary rates for organized employees to evaluate current salary levels and determine if classification rates need to be increased to avoid FLSA violations.

While the rule isn’t the most complicated legal change we’ve dealt with in the last three years, it is something that could lead to serious monetary implications if you’re not in compliance.  If you, or your organization need assistance in ensuring you’re following all applicable wage and hour laws, contact Wiley Reber Law, for legal advice that works.