The Department of Labor (DOL) released its highly anticipated final rule regarding overtime for white collar workers.
This overtime rule update does not affect farm labor or blue collar workers.
In order to be paid salary exempt the employee must pass one of the exemption tests below:
- Executive – Employees must manage a team or department, supervise two or more employees, and have the authority to hire or fire.
- Administrative – Employees must perform non-manual work, manage “back office” general business operations, and have decision-making authority on significant matters.
- Learned Professional / Creative Professional – As a learned professional, employees must perform intellectual tasks requiring advanced knowledge and specialized training in their fields. To pass the creative job duties test, employees must perform work requiring invention, imagination, originality, or talent in an artistic or creative field.
- Computer Professional – Employees must be able to design, document, test, create or modify computer programs related to machine operating systems or system design specifications.
- Outside Sales Employees – An employee’s primary role must be making sales outside of the employer’s business location.
As expected, the final rule will nearly double the salary threshold for exempt workers beginning January 1, 2025, with a smaller increase beginning on July 1, 2024. Below is a table with the scheduled increases:
| Effective Date | Salary Threshold for Exempt Employees |
| Before July 1, 2024 | $684 per week (equivalent to $35,568 per year) |
| July 1, 2024 | $844 per week (equivalent to $43,888 per year) |
| January 1, 2025 | $1,128 per week (equivalent to $58,656 per year) |
Under the federal Fair Labor Standards Act, employees who work more than 40 hours a week get paid 1.5 times their regular pay for the extra hours. Almost all hourly workers are eligible for overtime pay but salaried workers only qualify if they earn below a set amount.
Employers should assess their workforce now and determine the following:
- which employees meet the new salary thresholds,
- which employees’ salaries should be increased to meet the new threshold,
- which employees should be paid overtime, and
- if the employees meet the new salary threshold, ensure those employees meet the duties test to be exempt from overtime requirements.
Payments of bonuses and commissions may affect overtime rates for hourly and non-exempt employees. Such additional pay may be excluded from the overtime rate only if:
- Both the fact that the payment is to be made and the amount of the payment are at the sole discretion of the employer at or near the end of the period; and
- The payment is not made according to any prior contract, agreement or promise causing an employee to expect such payments regularly.
Guaranteed salary needs to be 90% of the threshold amount. 10% of nondiscretionary commission/bonus can only make up 10% to hit threshold. You can do a lump sum (retro payment) at the end of the year to make up the difference. This payment has to be made with the 1st payroll of the following year. (But cannot be counted in that year.)
Highly compensated employees are exempt with an annual compensation of $132,964 per year for July 1st 2024. This goes up to $151,164 for January 2025.