Federal Overtime Pay Eligibility Expanded
By Krista Hiner · Thu, Apr 25, 2024 2:06 PM
On April 24, 2024, the Biden-Harris administration finalized a rule to expand overtime eligibility for workers.1
Under federal law, employees are considered “non-exempt”, which means they are not exempt from any federal wage and hour laws (e.g., overtime pay) unless they qualify for a specific exemption from those laws. These two types of employees are often referred to as “hourly” versus “salary”, but the simplicity of those labels ignore the relevance of job duties at play. For example, an employer cannot assign a salary rate of $45,000 per year to an employee and, on that basis alone, refuse to pay overtime to that person.
There are a few combination of factors that can allow exemption, but a consistent requirement is the salary threshold. Currently, under federal law, unless an employee is paid $684 week (or $35,568 per year)2 then they will not qualify for an exemption regardless of what their job duties are. In other words, if an employee is being paid less than this amount, they are entitled to overtime pay when they work more than 40 hours in a week. A number of states have higher thresholds than this. (California’s threshold, for example, is currently $1,280 per week or $66,560 per year. That is the threshold that applies in the state of California even though the federal threshold is lower.) But some states simply mirror the federal threshold. And to be clear, if a state has a lower threshold than federal law, the federal threshold would still apply. Generally, the stricter threshold applies.
The new rule raises the salary threshold significantly. Effective July 1, 2024, the weekly threshold increases to $844, or $43,888 per year. Effective January 1, 2025, the weekly threshold increases again to $1,128, or $58,656 per year.3
Any U.S. employers with exempt employees earning less $58,656 should immediately plan for this change by either increasing salaries accordingly or preparing to reclassify those workers as non-exempt and eligible for overtime pay.
1.
BIDEN-HARRIS ADMINISTRATION FINALIZES RULE TO INCREASE COMPENSATION THRESHOLDS FOR OVERTIME ELIGIBILITY, EXPANDING PROTECTIONS FOR MILLIONS OF WORKERS, April 24, 2024 News Release U.S. Dept. of Labor https://www.dol.gov/newsroom/releases/whd/whd20240423-0.
2.
Part 541 Dept. of Labor (DOL) Final Rule 04-22-24, RIN 1235-AA39 https://www.dol.gov/sites/dolgov/files/WHD/flsa/ot-541-final-rule.pdf.
3.
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