The Fair Labor Standards Act (FLSA) sets fundamental workplace standards in the United States, including wage and hour regulations, recordkeeping requirements, and child labor protections. In a significant development, the U.S. Department of Labor (DOL) has finalized new overtime rules that will roll out in two phases, bringing substantial changes for employers.
While discussions continue about various aspects of these regulations, businesses need to prepare for these confirmed updates now.
Key Changes to the FLSA Overtime Rules
- Two-Phase Salary Threshold Increase:
- Effective July 1, 2024: The salary threshold for white-collar exemptions increased from $35,568 to $43,888 annually ($844 per week).
- Effective January 1, 2025: The threshold will further increase to $58,656 annually ($1,128 per week).
- Automatic Updates: Beginning in 2027, the salary threshold will be automatically adjusted every three years to reflect current wage data.
- Highly Compensated Employee (HCE) Threshold:
- Effective July 1, 2024: The HCE threshold increased to $132,964.
- Effective January 1, 2025: The HCE threshold will rise to $151,164.
- Nondiscretionary Bonuses: Up to 10% of the standard salary level can be satisfied by nondiscretionary bonuses, incentive payments, and commissions, paid annually or more frequently.
These changes could affect millions of workers and have substantial cost implications for employers across the country. We’ll provide updates to these rule changes as they become available. In the meantime, employers are encouraged to review FLSA classifications for each position and develop a plan of action assuming the new salary thresholds will go into effect at the proposed amounts. Contact your Rea advisor if you have questions about how this could impact your business or organization.
By Cheryl Coblentz (Wooster Office)