Recently, the Department of Labor issued a final rule, updating and revising regulations outlined in 13(a)(1) of the Fair Labor Standards Act.
The rule addresses the exemption from minimum wage and overtime pay requirements for executive, administrative, and professional (EAP) employees and will take effect on July 1, 2024, increasing both the standard salary level and the highly compensated employee’s total annual compensation threshold. Additional increases will occur on January 1, 2025, July 1, 2027, and every three years thereafter, utilizing a salary updating mechanism to reflect earnings growth.
Increases are outlined in the table below (from the Wage and Hour Division, Department of Labor website):
Click here to read the full announcement on the Wage and Hour Division of the Department of Labor’s website or view the explanatory YouTube video below.
It is important to note that this does not impact manual labor. Employees in the landscape industry working manually in the field are required to be paid time and a half for every hour worked over 40 in a given work week. Instead, this proposal targets other employees within your organization. There is a two-step process to avoid having to pay overtime.
Step #1 – Does the employee earn more or less than the threshold (which may move to $55,608). Any worker earning less than the threshold MUST be paid overtime. If the worker earns more than the threshold, you move to the next step.
Step #2 – The “duties test” classifies workers into several buckets that demonstrate greater degrees of responsibility or expertise which would exempt them from being paid overtime. These tests include:
- Executive test – management and the ability to hire/fire
- Administrative test – not manual labor and exercises discretion and independent judgment during daily job functions
- Professional test – obtains advance knowledge and intellectual in nature
- IT test – performs programming, database management and software engineering
- Outside sales employees test – primary sales are performed not in the office
If a worker earns over the threshold and meets one of the above criteria, they do not have to be paid overtime for hours worked in excess of 40 hours in a given work week. If they cannot meet one of these tests, the employee is entitled to overtime pay.
The Chamber of Commerce has already declared their intention to litigate this issue, similar to when the Obama Administration’s attempt to raise the threshold was found to be executive overreach and the rule was never implemented. Regardless, NALP will keep all members apprised of all developments but we recommend you consult with your HR and legal counsel to prepare for this potential increase.
