Note: This post was updated on November 18, 2024 to reflect the recent federal court decision invalidating the proposed overtime rule changes.
On November 15, 2024, a federal court struck down the overtime rule set to take effect on January 1, 2024. This decision not only blocks the proposed second salary threshold increase for exempt employees under the Fair Labor Standards Act (FLSA) but also nullifies the first increase that took effect on July 1, 2024.
What Were the Key Changes in the Overtime Rule?
The final rule, introduced in April 2024, revised regulations under section 13(a)(1) of the Fair Labor Standards Act, specifically targeting exemptions for executive, administrative, and professional (EAP) employees.
The revisions included increases to the standard salary level and the highly compensated employee total annual compensation threshold. Additionally, the ruling introduced a mechanism for timely updates of these earnings thresholds to reflect current data.
Under the ruling, the threshold for the standard salary level increased from $35,568 to $43,888 effective Jul. 1, 2024, and was scheduled to increase again to $58,656 effective Jan. 1, 2025.
The threshold for the highly compensated employee exemption increased from $107,432 to $132,964 effective Jul. 1, 2024, and was scheduled to increase again to $151,164 effective Jan. 1, 2025.
However, with the recent court ruling, these changes have been nullified, and the previous thresholds remain in effect until further notice:
- The threshold for the standard salary level remains at $35,568.
- The threshold for the highly compensated employee exemption remains at $107,432.
What This Means for Employers
Although immediate changes to employee classifications or salaries may no longer be required, it is still important to take proactive steps to ensure compliance with current FLSA regulations and to continue to monitor for any future developments. Here’s how you can safeguard your business:
Conduct a Classification Audit
Review your employee classifications to confirm they align with existing FLSA guidelines. Focus on job duties, salary levels, and exemption statuses. This is an excellent opportunity to address any potential compliance gaps.
Communicate with Employees
Transparency is key. If you had informed employees about the anticipated changes, be transparent about the court’s decision and its implications. Clear, proactive communication around compensation builds trust and minimizes confusion.
Monitor Regulatory Developments
The legal landscape around overtime regulations remains fluid for now. While an appeal from the Department of Labor (DOL) is possible, it is unlikely with the new administration taking office in January. However, it is unclear whether the new administration will revisit some or all of this rule. Staying informed about future rulings or changes will help you maintain compliance and reduce risks.
XpanseHR Can Help
Navigating the complexities of compliance can be overwhelming. Our team of HR and compensation experts is here to support your business with:
- Comprehensive pay audits to ensure compliance with current FLSA standards.
- Policy updates and expert guidance to prepare your business for regulatory shifts.
- Tailored solutions that align with your organization’s unique goals and challenges.
Don’t let compliance uncertainties disrupt your business. Contact us today to ensure your organization is ready for whatever comes next.
