Articles

Employment Law Update: Employers - Prepare for The Proposed Overtime Rule

Date: February 21, 2024
On February 14, 2024, the U.S. Department of Labor (DOL) Wage and Hour Division Administrator, Jessica Looman, testified before the House and confirmed the DOL’s intention to release its new overtime rule (the Rule) in April 2024, despite Republican representatives urging the DOL to withdraw a proposed overtime rule. To prepare for this impending change, employers should review exempt employee classifications now to ensure compliance after the Rule becomes effective.

The Fair Labor Standards Act (FLSA) is the federal law that 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 workweek. The Rule proposes to revise the white-collar exemptions tests under the FLSA. Under the FLSA, employees are exempt if they are employed in a bona fide executive, administrative, or professional capacity as those terms are defined in the Department of Labor’s regulations. These white-collar exemptions require a duties test and a salary basis test.

The most significant change to the exemptions test is the required salary basis. The DOL proposes to:
 
  • Increase the standard salary level from $684 to $1,059 per week ($55,068 annually);
  • Increase the highly compensated employee total annual compensation requirement from $107,432 to $143,988 per year; and
  • Automatically update these earnings thresholds every three (3) years with current wage data to maintain their effectiveness.

The Rule does not propose any change to the duties test. For a full discussion of the Rule, see Whiteford’s August 2023 client alert.

While there likely will be challenges filed to the proposed Rule, unless and until there is court intervention or other legal action setting the Rule aside, employers should prepare as follows:
 
  • Review employee classifications to confirm compliance with new salary basis to remain exempt.
  • Review employee classifications to determine whether employees should be reclassified as nonexempt.
  • For employees reclassified as nonexempt, ensure all hours worked are properly recorded.
  • For employees reclassified as nonexempt, review budgets, set hours expectations, and development policies for approval of overtime. 

For help preparing for these proposed changes, call any member of the Whiteford Labor and Employment Law team.
The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.