Effective July 1, 2024, the United States Department of Labor’s annual salary threshold to qualify for the white-collar exemption has increased from $35,568 to $43,888. It will further increase to $58,656 effective January 1, 2025, and will see another increase effective July 1, 2027, and every three years thereafter.

The Fair Labor Standards Act (FLSA) generally requires employers to pay overtime of at least one and a half times an employee’s regular hourly rate for hours worked in excess of 40 hours in a workweek. However, if the employee falls under the “white-collar exemption”, the employee is exempt from receiving overtime pay. To qualify for this exemption, the employee must meet three requirements.

1. 1. Receive a minimum salary amount of $844 per week (resulting in $43,888 annually) effective July 1, 2024, and $1,128 per week (resulting in $58,656 annually) effective January 1, 2025.
   2. Receive payment as a salary (meaning payroll is not altered for actual hours worked).
   3. Their position must include certain job duties, as outlined by the FLSA. The three main exemption categories are titled: Executive, Administrative, and Professional.

There is an additional exemption for highly compensated employees. These are employees who perform some but not all of the duties within one category from requirement three above. They can be exempted from being paid overtime as long as their annual salary is $132,964 as of July 1, 2024 (increasing from $107,432 prior to July 1, 2024) and $151,164 as of January 1, 2025. Their weekly minimum salary is the same as the amount in requirement one above, which allows for bonuses and other payroll options to be used to reach the annual threshold.

If you have employees who currently fall under the white-collar exemption for overtime pay but are paid under the weekly and/or annual thresholds effective July 1, 2024, or January 1, 2025, you will need to consider increasing their salary to meet the new threshold or remove them from exempt status and begin paying overtime based on actual hours worked.

This article provides a brief summary of the new overtime rules. If you would like to discuss this topic further, please contact your AHP professional or send an email to ahpinfo@ahpplc.com.