July 2024 Newsletter
OVERTIME RULE-FREQUENTLY ASKED QUESTIONS
The standard salary threshold for the overtime rule has a minimum weekly amount, which the new rule has raised. This amount currently is $684 per week. It is set to rise to $844 on July 1st and $1,128 on January 1, 2025, then increase again by an as-yet-to-be-determined amount July 1, 2027, and every three years after. Employees also must satisfy a duties test and be paid on a salary basis, in addition to being paid the standard salary threshold, to be eligible for an executive, administrative or professional exemption to the overtime rule, commonly referred to as the “white-collar” exemptions.
Can some employees be nonexempt and others be exempt in the same position?
Yes, but employers need to make sure there is a job-related reason for the difference to avoid discrimination claims.
Can nondiscretionary bonuses satisfy the minimum salary requirement?
It depends. Nondiscretionary bonuses can satisfy up to 10% of the minimum salary requirement for the standard salary threshold used for the white-collar exemptions. However, for the highly compensated employee exemption, employers can’t use nondiscretionary bonuses to satisfy the weekly salary threshold, but they can for the annual salary threshold.
The highly compensated employee exemption has a weekly salary and annual salary amount. It also has a duties test that is more relaxed than for the standard salary threshold. Currently, to be eligible for this exemption, an employee must earn a total annual compensation of $107,432 or more, which includes at least $684 per week paid on a salary or fee basis. That amount increases to at least $132,964 per year, which includes at least $844 per week on a salary basis, as of July 1, 2024, and then at least $151,164 per year, which includes at least $1,128 per week on a salary basis, effective January 1, 2025.
Can an employee be paid a salary and be nonexempt?
Yes.
Do changes to the overtime rule affect smaller employers?
Yes. There are two ways in which an employee can be covered by the law: “enterprise coverage” and “individual coverage,” according to the U.S. Department of Labor (DOL).
Employees who work for certain businesses or organizations—or “enterprises”—are covered by the Fair Labor Standards Act (FLSA). These enterprises, which must have at least two employees, are 1) those that have an annual dollar volume of sales or business done of at least $500,000 and 2) hospitals, businesses providing medical or nursing care for residents, schools and preschools, and government agencies.
Even when there is no enterprise coverage, employees are protected by the FLSA if their work regularly involves them in interstate commerce. Examples of employees who are involved in interstate commerce include those who:
Produce goods, such as a worker assembling components in a factory or a secretary typing letters in an office,that will be sent out of state.
Regularly make phone calls to people located in other states.
Handle records of interstate transactions.
Travel to other states on their jobs.
Do janitorial work in buildings where goods are produced for shipment outside the state.
Also, domestic service workers, such as housekeepers, full-time babysitters, and cooks, are normally covered by the law, according to the DOL.
Is there an exclusion from the overtime rule for nonprofits?
No.
What practices should employers review?
- Employers should look at the amount of overtime that employees work and determine how much overtime they want an employee reclassified as nonexempt to work going forward. Most employers will probably want to limit overtime.
- Review budgets
- Review job descriptions and policies.
- Create a communication plan to be able to effectively explain to employees why and how things are changing.
By looking at overtime hours, budgets, and job descriptions, employers should have a better idea whether they want to keep an employee exempt by raising their salary to meet the new salary thresholds or reclassify them as nonexempt to make them eligible for overtime pay.