On April 23, 2024, the U.S. Department of Labor (“DOL”) announced an update to the Fair Labor Standards Act overtime rule (“Overtime Rule”) which has substantial payroll implications and requires employers’ immediate attention.

The DOL’s update to the Overtime Rule increases the salary threshold for exempt employees – those working in professional, executive, or administrative positions who receive payment on a salaried basis – in determining eligibility for overtime pay. Currently, an otherwise exempt employee must receive a salary equivalent to $43,888 per year in order to be exempt from overtime pay. Importantly, on January 1, 2025, the salary threshold increases to $58,656 per year in order for employees to be exempt from overtime pay.

Employers must now decide whether to raise the salary of employees earning below the new salary thresholds so that their employees remain exempt from overtime pay. In the event an employer chooses not to raise an otherwise exempt employee’s salary to meet or exceed the new salary thresholds, the employer must be prepared to pay overtime when the employee works more than 40 hours in a week.

The DOL will recalculate the salary threshold, and issue further increases every three years. The Overtime Rule does not affect overtime requirements for workers who are paid hourly.

Brad and other members of the GCT Employment Law Team are continuing to monitor this area for additional updates and are available to assist you in navigating these new requirements. If you have any questions about the updated Overtime Rule, or any other employment related issues, please contact Brad at bslohsl@gct.law.