Changes to Fair Labor Standards Act – Effective July 1, 2024
Of all of the regulations imposed upon employers at the Federal, State and Local levels, none is more broadly impactful to how we define positions, roles & responsibilities and ultimately how we compensate our employees than the Fair Labor Standards Act (FLSA).
The FLSA is the federal law that establishes minimum wage, overtime pay eligibility, recordkeeping, and child labor standards for employees in both the private and public sectors. The FLSA applies to most full-time and part-time workers in the private sector and government at federal, state, and local levels.
As of July 1, 2024, the FLSA underwent significant changes to its overtime rules, affecting millions of workers and employers across the country.
At its core, the FLSA is a guidepost that’s used to:
- Set the minimum hourly rate to pay any employee (because NH does not have a State minimum wage),
- Define the “Duties” or types of roles that must apply to a position in order for it to be Exempt from the Overtime Rules, and
- Determine when and how much of a premium is owed for hours worked over 40/week, for Non-Exempt Employees
In order for any employee to be considered “exempt” from the overtime provisions of the FLSA, an employer must determine that the employee’s position qualifies for exemption under the Duties Test and the Wage Threshold test.
As long as they receive compensation at or above the Wage Threshold, certain employees can be exempted if their primary role meets the Duties Test defined by FLSA for the following categories: Executive, Administrative, Professional, Computer Employee, Outside Sales or Highly Compensated Employees.
Increase to FLSA Wages Threshold – in 2 Steps
Prior to July 1, 2024:
An employee who otherwise passes the “Duties Test” can be considered Exempt from the Overtime rules, as long as they earn a Salary Amount of $35,568 per year ($684/week) or more.
As of July 1, 2024:
An employee who otherwise passes the “Duties Test” can be considered Exempt from the Overtime rules, as long as they earn a Salary Amount of $43,888 per year ($844/week) or more.
As of January 1, 2025:
An employee who otherwise passes the “Duties Test” can be considered Exempt from the Overtime rules, as long as they earn a Salary Amount of $58,656 per year ($1,128/week).
Going forward, the US DOL will determine new Salary Threshold levels, starting with the new threshold that will become effective on July 1, 2027, and every three years thereafter. Previously, automatic increases to these salary thresholds were not codified in the regulation.
What Does this Mean for Employers?
Review your positions, wages paid and compensation method for each person to determine whether or not you need to make any changes immediately.
For staff members who are not being paid overtime, and currently earn a Salary Amount that is less than the equivalent of $43,888 per year, you will either need to redefine this position as an hourly role with overtime, or you will need to increase their pay in order to stay compliant with FLSA. Considering that there is another scheduled increase to this threshold effective on January 1, 2025 of nearly $15,000/year, you may also want to take this into account now.
For many employers, these rather drastic increases in the Overtime Wage Threshold amounts are likely to require seemingly burdensome changes to how we track time for and compensate our employees. Using the right systems and technology to ensure compliance, manage employee time and intuitively display the value of their compensation are vital.