DOL OVERTIME RULE

Source: US Department of Labor

As of July 1, 2024, the U.S. Department of Labor put into effect a new rule that adjusted overtime compensation requirements for those who work more than 40 hours in a week.

For an employee to be exempt from being paid overtime they must meet all three of the following requirements: (1) be paid a salary; (2) be paid a salary above a specified threshold; and (3) meet the defined duties of the specific exemption such as executive, administrative, or professional (often referred to as “white collar” exemptions).  These exemptions are important because non-exempt employees must be paid time and a half for any time worked past 40 hours a week.

Salary Thresholds Moving Forward

“Duties Test” for Identifying Exemptions

Executive, Administrative, and Professional positions are exempt from the overtime requirement rule. Below are descriptions of each of these roles to aid in determining an employee’s applicable exemption. Employees must meet all standards listed under each category to be exempt (with the exception of Highly Compensated Employees):

Executive Duties

  • Primary duty is management of the enterprise or of a recognized department or subdivision of the enterprise
  • Customarily and regularly directs the work of 2 or more employees
  • Has the authority to hire or fire employees or whose recommendations as to hiring, firing, advancement, or other changes to an employee’s status are given particular weight

Administrative Duties

  • Primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or employer’s customers
  • Primary duty includes the exercise of discretion and independent judgement with respect to matters of significance

Professional Duties

Learned Professional:

  • Primary duty is the performance of work requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellection instruction (this does not include learned skills from experience)

Creative Professional:

  • Primary duty is the performance of work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor

Computer-Related Occupations

  • Must be employed as a computer system analyst, computer programmer, software engineer, or other similarly skilled worker in the computer field performing the duties described below:
    • Application of systems analysis techniques and procedures including consultation with users about hardware, software, or system function specifications;
    • Design, development, documentation, analysis, creation, testing, or modification of computer systems or programs related to user or system design specifications;
    • Design, documentation, testing, creation, or modification of computer programs related to a machine operating systems; or
    • Combination of above duties requiring equal skill level

Outside Sales

  • Primary duty is making sales or obtaining orders/contracts for services or facilities for which a consideration will be paid by the client or customer
  • Customarily and regularly engaged away from the employer’s place(s) of business in performing such primary duty
  • No salary level or salary basis test

Highly Compensated Employee (HCE)

  • Primary duty includes performing office or non-manual work
  • Customarily and regularly performs any one of more of the exempt duties identified in the standard tests for the executive, administrative, or professional exemptions listed above (whereas non HCEs need to meet all requirements)
  • Weekly salary is at minimum equal to standard salary level threshold (the rest can be earned through commissions, nondiscretionary bonuses, and other non-discretionary compensation during a 52-week period)

 

For Employers

How do employers respond to the updated thresholds established in this final rule?

  • Increase salary of employee to minimum threshold requirements to keep overtime exempt status;
  • Or pay overtime premium of 1 ½ times employees’ regular rate of pay;
  • Or eliminate overtime hours.

 

This is intended to be an informational resource and not legal advice, please contact your legal and financial advisors with any questions. Additional information can be found at https://www.dol.gov/agencies/whd/overtime/rulemaking