Initial Change to the Federal Overtime Rule Goes Into Effect Today

Monday, July 1, 2024 - As we previously alerted you, starting today salaried workers making less than $43,888 per year may now qualify for overtime pay. The threshold is set to increase again to $58,656 on January 1, 2025. Previously, only salaried workers making less than $35,568 annually qualified for overtime pay when they worked more than 40 hours in a week.

The Fair Labor Standards Act (“FLSA”) regulates when employees must be paid minimum wage and overtime. Under the FLSA, overtime pay, which is due to all employees who do not fall within a specified exemption, is one and one-half times an employee’s regular pay rate for every hour that is worked beyond 40 hours in a work week. While hourly workers are generally entitled to overtime pay, salaried workers are not if they earn above a certain pay level and supervise other workers. That pay level is what the Department of Labor recently increased.

On April 23, 2024, the U.S. Department of Labor (“DOL”) announced the release of a final rule raising the minimum annual salary thresholds on July 1, 2024 and then again on January 1, 2025. This primarily applies to executive, administrative, and professional employees, commonly referred to as the “White Collar Overtime Exemptions.”

When a similar rule was supposed to take effect in 2016, the implementation was paused at the last moment by a federal judge who held that DOL exceeded its authority by making salary, rather than job duties, the controlling factor for whether an employee is an exempt executive, administrative, or professional employee. The 2016 rule never took effect, although the DOL approved a smaller increase to the minimum salary level in 2019, to the current $35,568 (or $684 per week).

Last week, another federal judge heard arguments on a motion to block implementation of the DOL’s new 2024 rule in the lawsuit State of Texas v. United States Department of Labor. The judge only halted the law, however, for workers employed by the state government of Texas. Such limited relief means, for now, that the rule is implemented and that employers must comply with the revised threshold of $43,888.

Besides the State of Texas lawsuit, business groups also sued DOL in a federal district court in Texas on the overtime rule, claiming DOL went beyond its authority under the Fair Labor Standards Act. While the first increase to $43,888 per year is now in effect, it is still to be determined whether the larger increase in January will take effect given the ongoing lawsuits. We will continue to keep you apprised of the legal proceedings.