A New Federal Overtime Regulation Stands to Alter the FLSA Exemption Status of Millions of Employees, According to the U.S. Labor Department

Yesterday, the U.S. Department of Labor announced the publication of a new regulation governing the salary minimums applicable to certain exemptions under the Fair Labor Standards Act; namely, the executive, administrative, professional, outside sales, [or] computer employee” (a/k/a “EAP”) exemption and the highly compensated employee (HCE) exemption. According to DOL estimates, the new rule is a major departure from the previous rule, potentially moving as many as four million employees from exempt to non-exempt status. This change may significantly benefit those workers who become non-exempt. It also represents a critical decision-making juncture for employers. To ensure your business remains compliant with the FLSA in the face of the changing exempt-versus-non-exempt landscape, consult a knowledgeable Atlanta wage and hour lawyer.

The new rule is the result of a months-long rulemaking process. Last September, the DOL published a proposed version of the regulation. The proposed rule called for increasing the minimum salary level for qualifying as an exempt EAP employee to $1,059 per week (or $55,068 annually.) The department chose that figure because it represented “the 35th percentile of weekly earnings of full-time salaried workers in the lowest-wage Census Region.” (By the way, that lowest region is here in the South.)

The proposed rule also called for raising the minimum salary for qualifying under the HCE exemption to $143,988 annually. That figure was equal to the “annualized weekly earnings of the 85th percentile of full-time salaried workers nationally.”

The salary figures in the final rule were slightly higher than those in the proposed rule, with $1,128 per week ($58,656 annually) representing the minimum for employees under the EAP exemption. The final rule set the minimum for the HCE exemption at $151,164 annually.

These are significant increases from the previous version of the rule, which set the floor for qualifying under the EAP exemption at $684 per week (or $35,568 annually,) and the floor for the HCE exemption at $107,432 annually.

The final rule takes a stairstep approach to implementing these changes. The rule establishes an intermediate applicability date of July 1, 2024, with intermediate minimum salary thresholds. Those are $844 per week ($43,888 annually) for the EAP exemption and $132,964 for the HCE exemption. The applicability date for full compliance with the higher thresholds is January 1, 2025.

Actions Employers May Need to Contemplate

Employers will need to consider reviewing their employee compensation structure. For the vast majority of previously exempt employees who stand to become non-exempt, employers will need to re-classify those exempt employees as non-exempt or else increase their compensation to clear the higher minimums the new rule established. Employers who want to avoid paying overtime compensation (legally) may also want to review carefully the work schedules and hours of employees they re-classify as non-exempt to ensure those employees are not working more than 40 hours a week.

Experienced counsel can be crucial to FLSA compliance, whether they are remaining vigilantly up-to-date with legal and regulatory changes or evaluating your business’s policies and practices. A knowledgeable lawyer is also vital if you’re a worker who has been wrongfully denied overtime compensation the law says you deserved. The skilled Atlanta unpaid overtime attorneys at the law firm of Parks, Chesin & Walbert are fully cognizant of all the nuances and details of the FLSA and FLSA regulations. Contact us today at 404-873-8048 or through this website to schedule a consultation to get the reliable answers you need to all the questions you have.

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