DOL Publishes New FLSA Exemption Rule…
As we noted last month, this was expected – as are legal challenges. The criteria for exemption from overtime requirements are to be upgraded as follows:
For "Regular" Exempt Employees
Effective Date - July 1, 2024
Current Threshold - $684/week
New Threshold - $844/week
Annual Equiv. - $43,888
% Increase - 23%
Effective Date - January 1, 2025
Current Threshold - $844/week
New Threshold - $1128/week
Annual Equiv. - $56,646
% Increase - 34%
For "Highly Compensated" Exempt Employees
Effective Date - July 1, 2024
Current Threshold - $107,432/year
New Threshold - $132,964/year*
Annual Equiv. - n/a
% Increase - 24%
Effective Date - January 1, 2025
Current Threshold - $132,964/year
New Threshold - $151,164/year**
Annual Equiv. - n/a
% Increase - 14%
*Including at least $844/week paid on a salary or fee basis.
*Including at least $1128/week paid on a salary or fee basis.
Above figures are to be re-assessed for inflation starting July 1, 2027, and every 3 years thereafter.
NOTE: Non-discretionary bonuses, incentive payments and/or commissions that are paid annually can account for up to ten (10) percent of the above figures.
The advice to employers at this point is “get ready, but wait,” according to the National Law Review.
As noted last month, lawsuits challenging the new rule have been filed, and more are expected; further although it will have no effect on the implementation of the bill.
… So, What Are Employers to Do?
For employees whose status changes because of the above actions, there are basically two choices: either reclassify them as non-exempt and pay them overtime, or increase their pay above the threshold. There is virtually no chance the rule might be struck down by July 1, so that threshold should be met. Beyond that, it is a roll of the dice as to whether legal action might halt the implementation of the January 1 threshold, so employers can take a wait-and-see stance, since that is a rather hefty increase. It should be kept in mind that the duties and salary-basis (consistent, regular pay) tests for exemption are not changing, so those must be observed as well. If the decision is made to convert the employee to non-exempt, the duties test no longer has to apply, so position descriptions may warrant revision. Pay equity among peers is also a consideration. Note that “equity” means “fairness,” not necessarily “equal pay.” Employers are still allowed to take performance and length of service into account – for now, at least. Other considerations include any adverse morale impact from conversion to non-exempt (i.e., perceived demotion/loss of status); a re-examination of any additional compensation the employee may be receiving (e.g., bonuses, etc.); and an examination of potential pay compression between positions or individuals. Finally, think ahead of time how any changes are to be communicated regarding this sensitive topic.
A survey by Littler Mendelson revealed a 51% -49% split between companies that do and companies that do not use generative AI for some HR functions. Primary concerns were compliance with the myriad laws that are being promulgated – particularly with regard to data protection and security, both in the US (state and federal) and internationally. Over 80 percent of the respondents were from large organizations.
The advice from the survey group was that employers “should be intentional about their generative AI usage, not only with regard to whether they use it at all, but also how, why and when.”