Department of Labor Issues Final Rule for Exemptions to Overtime

Emily J. Meister

The Department of Labor (the “DOL”) has issued a final rule regarding overtime exemptions under the Fair Labor Standards Act (commonly referred to as the “FLSA”), which rule should be noted by employers and employees alike.

The FLSA, which applies to most employers throughout the country and, indirectly, their employees, controls the classes or categories of employees that are exempt from overtime pay and what additional factors must be met before employers can avoid overtime payments. 

Today’s issuance of the new rule follows years of debate, announced rules, and litigation that saw the proverbial pendulum swing, at various times, from more favorable to employees than that of employers and vice versa. Indeed, initial changes that were to go into effect in 2016 and which would have raised the minimum amount employees had to be paid to be considered exempt were stayed upon the issuance of a nationwide preliminary injunction by the U.S. District Court for the Eastern District of Texas, and changes that were proposed by the DOL in 2019 never went into effect.

However, under the final rule announced by the DOL today, executive, administrative and professional employees must be paid the equivalent of a $43,888.00 annual salary or $844.00 weekly salary on or before July 1, 2024 and the equivalent of a $58,656 annual salary or $1,128.00 weekly salary on or before January 1 to potentially be exempt. Conversely, executive, administrative and professional employees making less than such amounts will be entitled to overtime compensation, and employers for such employees will be required to keep records of the hours worked by their non-exempt employees to ensure that overtime pay due such employees is properly calculated and paid. 

In order to avoid these requirements, some employers may choose to raise the salary for their executive, administrative and professional employees. Before doing so, however, employers should note that salary is not the exclusive determinant of whether or not an employee is considered exempt from the FLSA’s overtime and recordkeeping requirements. Rather, depending on their category (i.e., administrative, professional or executive) employees must also perform certain duties or exercise certain oversight as part of their routine or normal job in order to be considered exempt. (Highly compensated employees may still be considered exempt even if they do not otherwise meet the duty test provided that such employees, under the new rule, meet at least some of the duty or responsibility requirements, perform office or non-manual work and are paid annual compensation of $131,964.00 per year or $844.00 per week by July 1, 2024 and $151,164.00 per year or $1,128.00 per year by January 1, 2025.)

The failure to properly determine an employee’s status and to pay him accordingly can significantly impact both the employee and the employer. From the employee’s perspective, he may be missing out on wages to which he is entitled and may, forever, lose the ability to recover such damages once the statute of limitations runs (typically after two years). From the employer’s perspective, failure to comply can be costly since courts have the ability to impose fines, double the damages or wages owed to improperly paid employees, and award employees their attorney’s fees.   

For further help determining whether you or your employees are exempt and how the new rule changes may impact you or your business, contact the knowledgeable and experienced employment attorneys of Law Firm Carolinas.

Corporate LawLitigation