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There have been some changes in how overtime exemption qualifications are meet for employees. The update is on the salary portion of the over all. We've got the key highlights for you below.
Quick Note: Salary is a method of payment. Making an employee salaried does not excuse you, the employer, from overtime requirements. There is a multi-part test you should conduct for each employee to see if they are exempt from overtime. You can read more on this test from the Wage & Hour Division's Fact Sheet 17A.
Starting July 1, 2024, The Department of Labor officially changed overtime rules for employees who are paid a flat salary of at least $43,888 per year. (The prior threshold was $35,568.) If you have salaried employees who are paid less then $43,888 as of July 1, 2024, the are automatically entitled to overtime wages.
The threshold increase is not done. Beginning January 1, 2025, the flat salary threshold increases to $58,656. If you have salaried employees who are paid less then $58,656 as of January1, 2025, the are automatically entitled to overtime wages.
For either threshold increase, salaried employees who aren't supervising anyone or have a job description that fits the necessary exempt test, you will be federally required to pay them overtime wages should they be earned. (Read more on this in Wage & Hour Division's Fact Sheet 17A)
The burden to prove overtime was or wasn't earned is on the employer. While you can leave a salaried employee at their salary, you will be required to prove to the employee and any examining payroll oversite agency the hours worked and that overtime wasn't earn or was earned and paid appropriately.
For Texas employers, a federal court has challenged and suspended this ruling. If your business is in Texas or has employees working in Texas, we encourage you to speak with knowledgeable labor law attorney to properly classify your employees at this time.
Compliance with this new Department of Labor rule is mandatory. There are no exceptions, exemptions, or exclusions. There is also no phase-in forgiveness. If you do not adjust your employee classifications properly, you may be fined by federal and state agencies.
Legal Disclaimer: This post contains general information for taxpayers and should not be relied upon as the only source of authority. Taxpayers should seek professional tax or legal advice for more information. This information was current at time of posting; we are not responsible for updating this or any blog post/article for subsequent changes in the law or its interpretation.
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