FAIR LABOR STANDARDS ACT (“FLSA”) OVERTIME RULE

Effective July 1, 2024

On April 23, 2024, the U.S. Department of Labor (“the Department”) announced a new overtime rule, which goes into effect July 1, 2024. The new rule will significantly increase the number of employees who are eligible for overtime pay under the Fair Labor Standards Act (“FLSA”). Though the new rule will not impact teachers, a number of school district employees may soon become eligible for overtime pay.

The FLSA requires most employees to be paid overtime for any work that exceeds the 40-hour workweek. However, the law provides an exemption for those salaried employees classified as executive, administrative, or professional (“EAP exemption”). To determine whether an employee qualifies for the EAP exemption, the employee must pass both a salary test and a job duties test. While the job duties test will not be impacted by the new rule, the salary test has been substantially revised.

Under the current rule, salaried employees qualify for overtime only if they earn below a certain salary. Presently, the minimum salary for such employees is set at $684 per week (equivalent to $35,568 per year). Employees who make more than that amount are not eligible for overtime pay. The earnings threshold has long sparked criticism for being too low, resulting in the Department taking steps to increase the salary requirement.

Under the new rule, the minimum salary will be increased to $844 per week (equivalent to $43,888 per year). The rule further provides that, on January 1, 2025, the minimum salary will be increased to $1,128 per week (equivalent to $58,656 per year). Thereafter, the amount will be reviewed by the Department every three years.

As noted above, the job duties test will not be impacted by the new rule. The job duties test requires that an employee perform certain duties to be exempt from overtime. To meet the job duties test as an executive employee, the employee must manage a team or department, supervise two or more employees, and be able to hire or fire. As an administrative employee, the employee's primary duties must consist of office or non-manual work, management of general or “back office” operations, with decision-making authority on significant matters. Regarding professional employees, the job duties test differentiates between a learned professional and a creative professional. The learned professional's job duties must consist of work that is intellectual in nature and advances knowledge in some capacity, usually in the fields of science or teaching. The creative professional's duties must be work requiring invention, originality, imagination, or talent in an artistic or creative field.   The Department's website provides more information about these tests.

If you have any questions about these changes or about overtime eligibility in general, please feel free to reach out to us.