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DOL plans to increase overtime salary threshold to $44K in July, rising to $59K next year

The U.S. Department of Labor’s final rule regarding the Fair Labor Standards Act’s minimum annual salary threshold for overtime pay eligibility is set to be implemented in two stages. This change is expected to expand overtime pay eligibility to millions of U.S. workers.

The methodology for determining the threshold involves using wage data, with updates occurring every three years based on current wage trends. However, the Department of Labor reserves the right to delay updates if changes to the methodology or update mechanism are deemed necessary.

This rule follows other recent regulatory updates, including DOL’s independent contractor final rule and the U.S. Equal Employment Opportunity Commission’s pregnancy accommodation rule. The overtime exemption applies to workers classified as bona fide executive, administrative, professional, and outside sales employees, as well as certain computer employees.

The increases are expected to affect approximately 1 million workers in July 2024 and an additional 3 million workers in January 2025. Highly compensated employees will also see an increase in the minimum salary threshold, rising to $132,964 on July 1 and $151,164 on January 1, 2025.

The final rule received input from various stakeholders, including the Society for Human Resource Management (SHRM), which requested a delay in the effective date until 2025 to allow employers more time to assess and comply with the rule.

Acting Secretary of Labor Julie Su emphasized the importance of ensuring that workers are fairly compensated for their time, especially those who work more than 40 hours a week without additional pay.

Challenges to the rule are anticipated, with potential legal battles in federal courts and discussions in Congress regarding legislative action to block the rule. In the meantime, employer-side attorneys recommend that employers assess which positions will be affected and decide whether to convert affected employees to hourly, nonexempt status and pay overtime, or raise their pay to meet the new threshold.