As of July 1, 2024, millions of U.S. workers gained eligibility for overtime pay under a new rule from the U.S. Department of Labor (DOL). This rule raises the salary thresholds for exempt employees—those workers who currently don’t qualify for overtime pay due to their job duties and compensation. By increasing these thresholds, the DOL aims to expand overtime eligibility and ensure fair compensation for more employees. However, the rule has generated substantial discussion, particularly as it marks the most significant salary threshold increase in years.
Understanding the Changes in Exempt Employee Classification
The Fair Labor Standards Act (FLSA) governs minimum wage and overtime requirements in the United States. Certain types of workers—such as those in administrative, executive, or professional roles, often referred to as “white-collar” positions—have historically been exempt from these requirements if they meet specific salary and job duties criteria. These criteria are periodically updated, but the most recent overhaul makes some of the most sweeping changes in recent memory.
New Salary Thresholds
Starting July 1, 2024, the minimum salary for an exempt employee in a white-collar position increased to $43,888 annually ($844 per week) from the current $35,568 ($684 per week). On January 1, 2025, the threshold will rise again to $58,656 annually ($1,128 per week). For those classified as “highly compensated employees,” the threshold will increase from the current $107,432 to $132,964 in July 2024 and further to $151,164 in January 2025.
The DOL’s objective is to better align salary thresholds with current wage trends, ensuring that workers who earn less than these amounts are eligible for overtime pay.
Who Will Benefit?
The DOL estimates that millions of workers currently classified as exempt will gain overtime eligibility under the new thresholds. If you’re earning below the new limits, you may qualify for overtime pay—unless your employer raises your salary to meet the threshold for exemption.
For instance, if you work in a white-collar position earning $40,000 a year, your employer will either need to reclassify you as a non-exempt employee—meaning you’re eligible for overtime—or raise your salary to at least $58,656 by January 1, 2025.
Impact on Highly Compensated Employees
For those classified under the “highly compensated” exemption—often employees in higher-salaried white-collar roles who don’t strictly meet all of the standard exemption criteria—the new rule means an even more substantial salary increase is required to maintain exemption status. If you earn less than $132,964 annually after July 2024 (or $151,164 after January 2025), you’ll likely be entitled to overtime pay.
What Should Employees Know?
For employees, the primary takeaway is that if you’re in a salaried position below the new thresholds, you may soon be eligible for overtime pay. Here are some key points to consider:
- Tracking Work Hours: If you’re reclassified as non-exempt, your employer will likely require you to track your hours carefully. You may be eligible for overtime pay for hours worked over 40 in a week.
- Overtime Calculation: Under the FLSA, overtime pay is generally calculated as 1.5 times your regular hourly rate. This rule applies to all non-exempt employees, regardless of whether they’re paid hourly or salaried.
- State-Specific Rules: Keep in mind that states like California have their own wage and hour laws, which set even higher salary thresholds for exempt employees. So, if you’re in California or another state with stricter laws, the new federal rule might not impact you as directly.
How to Identify and Address Misclassification
While the updated rule aims to bring more workers under overtime protection, some employers may attempt to misclassify employees to avoid paying overtime. Here are common signs of potential misclassification:
- Unclear Job Duties: If your job duties don’t align with an administrative, executive, or professional role, you might be misclassified as exempt.
- Salary Below the Threshold: After July 2024, if you’re earning less than $43,888 and are classified as exempt, your employer may need to reevaluate your status.
- Excessive Work Hours: If you regularly work over 40 hours per week without overtime pay, especially if your salary is close to the new threshold, it’s worth consulting a labor law professional.
If you suspect that your employer may be misclassifying your role, you can seek assistance from an employment law attorney to understand your rights and potential legal remedies.
What This Means for Workers in California
California has its own wage and hour laws, which are often more employee-friendly than federal standards. Currently, California’s exempt salary threshold is set at twice the state minimum wage for a 40-hour workweek, which amounts to $66,560 annually—substantially higher than the federal threshold. Additionally, California does not recognize the “highly compensated” exemption.
Therefore, many California workers already qualify for overtime under state law, and the DOL’s new thresholds may not directly impact them. However, the DOL’s changes may still serve as an important point of reference and encourage employers in California to examine their pay practices.
Talk to the Professionals About Your Overtime Rights
The DOL’s new salary thresholds for exempt employees represent a significant expansion of overtime eligibility for millions of American workers. While California’s laws already provide robust overtime protections, this federal rule is a major development in labor law and may increase the number of workers nationwide who can receive overtime pay.If you’re unsure how these changes affect you or if you suspect misclassification in your role, reaching out to an employment law professional can help ensure your rights are protected as these new standards come into effect. The attorneys at the Law Offices of Todd M. Friedman, P.C. are available to provide guidance and help you understand how this rule change may impact your employment status and pay.
