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  • The U.S. Department of Labor’s (DOL’s) has implemented a new overtime rule that will significantly increase the salary threshold for white-collar exemptions to overtime requirements in two phases, including the following:

    • Effective July 1, 2024, the Fair Labor Standards Act’s (FLSA’s) annual salary-level threshold for white-collar exemptions to overtime requirements will increase from $35,568 to $43,888. 
    • Effective January 1, 2025, the annual salary threshold will rise to $58,656 – nearly a 65% increase from the current level. 

    The Fair Labor Standards Act (FLSA) mandates overtime pay for the majority of employees, but it also provides exceptions for certain job categories. Those employees who qualify for overtime pay are labeled as “nonexempt,” while those who do not qualify are termed “exempt.” The most frequently seen exemptions from overtime, commonly known as the “white-collar exemptions,” encompass roles such as executive, administrative, professional, outside sales, and specific computer-related jobs.

    Who Is Affected

    To qualify for white-collar exemptions, employees must be paid a salary of at least the threshold amount and meet certain duties tests. If they are paid less than the threshold or do not meet the tests, they must be paid 1.5 times their regular hourly rate for hours worked in excess of a 40-hour work week. FSLA’s white-collar executive, administrative, and professional exemptions are not eligible for overtime pay.

    The new rule is expected to expand overtime protections to lower-paid salaried workers, which could provide meaningful financial relief for some employees. However, the changes may also burden small businesses, potentially forcing them to cut jobs or raise prices.

    Proceed With Caution

    Employers will need to carefully review their exempt employees’ salaries and decide whether to raise them to maintain the exemption or to reclassify them as non-exempt and pay overtime. This process should be approached cautiously, as the rule is likely to face legal challenges.

    Employers will need to:

    • Budget for increases in salary and overtime expenses. 
    • Plan for communication or reclassification decisions. This will include training reclassified employees on timekeeping requirements and rules against off-the-clock work. Employers must also manage concerns that employees might raise if they are upset about losing their salaried status. 
    • Considering the 2025 salary-level thresholds and the interim, employers must determine whether to accomplish this in two steps or jump straight to the 2025 threshold. 
    • Be mindful of state, local, and wage and hour laws that may impose additional requirements for exempt status beyond federal requirements under the FLSA. 

    How To Navigate This Rule

    GMS can help your company stay compliant with the DOL’s new overtime rule and manage the associated challenges. Our team of HR experts can assist with analyzing your workforce, determining the appropriate classification for each employee, and implementing any necessary salary adjustments or reclassifications.

    We can also provide guidance on navigating the legal uncertainties, training programs for managers and employees on the new requirements and ensuring your payroll and timekeeping systems are updated to comply. By partnering with GMS, you can confidently navigate these complex regulatory changes and avoid penalties or disruptions to your business. Contact us today!

  • On February 22nd, 2023, the U.S. Supreme Court ruled in favor of an oil rig worker for overtime exemptions under the Fair Labor Standards Act (FLSA). Under the Helix Energy Solutions Group Inc. v. Hewitt case, the Supreme Court ruled that to be exempt from the requirement of being paid overtime after working over 40 hours a week, an employer must pay the employee their full salary in any week in which they perform work. In simpler terms, the recent ruling declared that highly compensated employees could be eligible for overtime pay if they are paid on a daily basis. If the employer does not follow that, the employee is entitled to overtime compensation regardless of their job duties or position.

    Understanding The Court Case

    During the Helix Energy Solutions Group Inc. v. Hewitt court case, the Supreme Court was asked whether an overtime exemption under the FLSA applied to non-salaried high-earning employees. The distinction, in this case, is whether a high-earning employee should be compensated on a salary basis when his paycheck is based on a daily rate. The Supreme Court declared the long-standing FLSA and Department of Labor regulations to be upheld and considered a salaried, overtime-exempt employee, the employee must receive his full weekly salary in any week in which the employee performs any work.

    What You Should Know As A Business Owner

    The new ruling makes it essential for business owners to implement the criteria within their businesses properly. If you don’t, you could face hefty penalties. Let’s break down what the ruling says and what you should know.

    • Employees are exempt from overtime under the FLSA if they earn at least $107,432 per year on a salary basis (now at least $684 per week) and perform executive, administrative, professional, or outside sales work
    • The predetermined salary level cannot vary based on the quality or quantity of work
    • Business owners may use nondiscretionary bonuses, incentive payments, and commissions to meet up to 10% of the standard level salary
    • To be considered an executive, the employee must manage the business, direct the work of at least two full-time employees, and have the authority to hire or fire employees
    • An administrative employee is considered an individual who performs office or nonmanual work directly related to management or general business operations
    • A professional employee is defined as one who must do work that requires advanced knowledge, is predominantly intellectual in character, and includes exercising discretion and judgment

    Additional information can be found here.

    Additional Measures To Take

    Everchanging rules and regulations is a constant battle you face as a business owner. You didn’t start your business to become a lawyer or one who understands and implements every single law associated with your business. That’s where Group Management Services (GMS) comes in to help you. Our team of HR experts ensures you remain compliant with every new law that can affect your business. Whether it’s creating a job offer that clearly states their compensation and overtime pay or working with you to implement these new laws and regulations, we’re here to help. Ready to alleviate some of the weight you’re carrying? Contact us today.