News & Insights


Under the Fair Labor Standard Act (“FLSA”), overtime pay is one and one-half times an employee’s regular pay rate for every hour that is worked beyond the 40 hours in a workweek. Almost all hourly workers are automatically eligible for overtime pay; however, workers who are paid on a salary basis are only eligible for overtime if they earn below the salary threshold.

On August 30, 2023, the U.S. Department of Labor announced a proposed rule to amend the current threshold for salaried workers in an attempt to adjust for inflation. It is estimated between 3.6 to 4.3 million workers will be entitled to overtime as a result of the new rule. The rule will phase in updated salary thresholds using two steps over the next seven months.

Effective on July 1, 2024, the salary threshold for executive, administrative, and professional employees (“EAPs”) will be raised to $844.00 per week. This is roughly the equivalent of $43,888.00 per year for a full-time worker. On January 1, 2025, the salary threshold will again increase to $1,128.00 per week, which is roughly the equivalent of $58,656.00 per year for a full-time worker. As a result of the latter increase, the threshold will move from the 20th percentile to the 35th percentile of full-time salaried workers within the lowest-wage Census region.

On July 1, 2024, the rule will also increase the required minimum annual compensation threshold for highly compensated employees to $132,964.00. This amount will increase on January 1, 2025 to $151,164.00.

In addition to the threshold increases, the rule provides for an automatic update of the threshold every three years using the current wage data and methodology. This provision also includes language that permits the Department of Labor to temporarily delay subsequent increases if necessary.

While the new rule does not place any new requirements on employers at this time, it could significantly affect the employer’s operational and compliance costs, as well as increase their litigation risks. As such, an employer should review each employee’s classification and determine whether an adjustment to the employee’s salary or job reclassification is warranted. It is also important that an employer consult with legal counsel to understand the full implications of the new rule.