As of July 1, 2024, significant updates to overtime regulations under the Fair Labor Standards Act (FLSA) have taken effect, impacting millions of workers across the United States. For New York employers and employees alike, understanding these changes is crucial. Read this blog and speak with our Nassau County, NY employment lawyers to learn about the nuances of the new overtime rule and its implications. Here are some of the questions you may have:
What Are the Key Changes in the New Overtime Rule Under the FLSA?
The U.S. Department of Labor (DOL) has announced a series of adjustments to the salary thresholds that determine eligibility for overtime pay under the FLSA. These changes aim to extend overtime protections to a larger portion of the workforce.
Starting July 1, 2024, the salary threshold for exempt employees will increase from $684 per week to $844 per week. This change translates to an annual salary of $43,888. Then, on January 1, 2025, this threshold will rise further to $1,128 per week, equivalent to $58,656 annually. These adjustments are part of a broader effort to ensure that lower-paid salaried workers receive fair compensation for hours worked beyond the standard 40-hour workweek.
Highly compensated employees (HCEs), who have a different threshold for exemption, will also see changes. The total annual compensation requirement for HCEs will increase from $107,432 to $132,964 on July 1, 2024, and then to $151,164 on January 1, 2025. These figures are designed to keep pace with inflation and wage growth, providing a more accurate reflection of current economic conditions.
How Will These Changes Impact Employers and Employees?
For employers, particularly those in New York’s bustling business environment, these changes necessitate a thorough review of employee classifications and compensation structures. Employers must ensure that employees who meet the new salary thresholds are correctly classified to avoid potential legal disputes and ensure compliance with the FLSA.
Employees, on the other hand, stand to benefit significantly from these updates. Those who previously earned just above the old threshold may now qualify for overtime pay, offering them greater financial security and compensation for their extra hours of work. This change aligns with the fundamental principle that a hard day’s work deserves a fair day’s pay.
However, it’s important for both employers and employees to understand the criteria for exemption. To be classified as exempt, an employee must meet three tests: the salary basis test, the salary level test, and the duties test. These tests determine whether an employee’s primary duties involve executive, administrative, or professional tasks. If an employee fails to meet all three criteria, they must be considered non-exempt and thus eligible for overtime pay.
What Steps Should Employers Take to Prepare?
Preparation is key to ensuring compliance with the new overtime rule. Employers should start by reviewing their current employee classifications and salaries. This review will help identify which employees might be affected by the new thresholds and whether any adjustments are necessary.
For employees currently classified as exempt but earning below the new salary thresholds, employers have two options: increase their salaries to meet the new minimum levels or reclassify them as non-exempt. Reclassifying employees as non-exempt means they will be eligible for overtime pay, which could increase payroll costs but will ensure compliance with the FLSA.
Communication with employees is also crucial. Employers should inform affected employees about any changes to their classification or compensation to maintain transparency and avoid confusion. Additionally, staying informed about further updates to the FLSA and seeking legal guidance can help employers navigate these changes effectively.
