Changes to Overtime Rules That Could Affect Your Business
The Fair Labor Standards Act (FLSA) determines which employees are eligible for overtime pay. Non-exempt employees receive overtime pay at a rate of one and a half times their regular rate for any hours worked over 40 in a workweek. To be exempt from overtime pay, an employee must pass both the salary and duties tests provided by the FLSA. These exemptions apply to Executive, Administrative, and Professional (EAP) employees. On April 24, 2024, the Department of Labor (DOL) issued a final rule that took effect on July 1, 2024. Here’s what you need to know about the changes:
To qualify for the EAP exemption, an employee must:
- Be paid on a salary basis, which is not subject to reductions based on work quality or quantity.
- Meet the minimum salary threshold and the duties test set by the Department of Labor (DOL).
Salary Test:
- As of July 1, 2024, the threshold is $844 per week ($43,888 annually).
- On January 1, 2025, it will rise to $1,128 per week ($58,656 annually).
- Future updates will occur every three years.
Duties Test:
- Executive Employees:
- Primary duty is management of the enterprise or a recognized department.
- Regularly directs the work of at least two other employees.
- Has authority or significant influence in hiring, firing, and promoting employees.
- Administrative Employees:
- Primary duty is office or non-manual work related to management or general business operations.
- Exercises discretion and independent judgment on significant matters.
- Professional Employees:
- Primary duty is work requiring advanced knowledge in a field of science or learning, acquired through specialized education.
- Includes work that requires invention, originality, or artistic talent.
Highly Compensated Employees (HCEs):
- HCEs are exempt if they receive total annual compensation of $132,964 or more and regularly perform at least one of the exempt duties of an EAP employee.
- The threshold will increase to $151,164 on January 1, 2025.
To find out more visit https://crsreports.congress.gov/product/pdf/IF/IF12480
Always consult with a tax professional for professional advice.
Matthew Bluzer
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