The Fair Labor Standards Act (FLSA) requires employers to pay employees a minimum wage and overtime compensation of at least one and a half times the employee’s regular rate of pay if the employee works more than forty hours in a week. However, the FLSA exempts certain employees from these minimum wage and overtime pay requirements. To be exempted, the employee, generally, must:
- Be paid a salary (a predetermined and fixed amount no subject to reduction because of variations in the quality or quantity of work performed);
- Be paid at least a specified weekly salary level; and
- Primarily perform executive, administrative, or professional duties (as defined in the DOL’s Regulations).
In April of this year, the U.S. Department of Labor (DOL) issued the final rule raising the overtime exemption threshold for employees under the FLSA. The new rule is expected to go into effect on July 1, 2024.
The new rule increases the salary threshold to which employers may exempt employees from overtime pay requirements. The updated threshold is $844 per week or $43,888 per year for the remainder of 2024. Beginning January 1, 2025, the threshold increases again to $1,128 per week or $58,656 per year. Employees whose compensation is below these thresholds are entitled to the protections of non-exempt employees under the FLSA.
Further, the new rule increases the salary threshold for classification as a “highly compensated employee” to $132,964 ($844 per week) on July 1, 2024 and $151,164 ($1,128 per week) on January 1, 2025.
The rule also introduces a mandatory adjustment schedule whereby the threshold amounts will be updated every three years based on the latest earnings data.
The rule does not change the requirements or qualifications of exemption, and nonprofits should keep in mind that state wage-and-hour laws continue to apply.
Note that it is widely anticipated that this rule will face multiple legal challenges, thus delaying its effective date. Nonetheless, there is no guarantee of a delay. Accordingly, nonprofits should be planning for the July 1, 2024 and January 1, 2025 changes now to ensure the organization is prepared when the new rule becomes effective.
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Kyler Mejia is an associate (bar admission pending) with Caritas Law Group, P.C. Kyler counsels nonprofit and socially responsible businesses on corporate, trademark, tax, and fundraising matters nationwide and advises donors concerning major gifts. To schedule a consultation, call 602-456-0071 or email us through our contact form.