Department of Labor Updates Overtime Rules

Compliance, Employee Benefits

The Employer Group (TEG) has been creatively solving payroll, human resources, and benefits administration challenges for clients for over 25 years. TEG, M3’s wholly-owned subsidiary, offers customized solutions to organizations of all sizes and industries, ranging from serving as a PEO (Professional Employer Organization) to providing full payroll services and a wide array of human resources administration and consulting.

  • Be paid a salary that is predetermined and is not subject to reduction due to quality or quantity of work;
  • Be paid at least a specified weekly salary level; and
  • Primarily perform executive, administrative, or professional duties.

Certain employees may also be exempt from the FLSA overtime and minimum wage requirements if they satisfy the highly compensated employee exemption. An employee can satisfy the HCE exemption if:

  • The employee earns a salary at or exceeding the compensation limit, including at least a certain amount of salary per week;
  • The employee’s primary duty includes performing office or non-manual work; and
  • The employee customarily and regularly performs at least one of the exempt duties or responsibilities of an exempt executive, administrative, or professional employee.

If state law requires higher minimum salaries than what is required by the federal rule, the state minimums must be followed.

Starting on July 1, 2027, the minimum salary levels will be updated every three years using the data available at the time. Although the future minimums are unknown at this time, employers will have at least 150 days’ notice before those changes take effect.

The last time the DOL attempted a significant change to the salary minimums, the rule was challenged and ultimately blocked just weeks before taking effect. While there is no way of predicting if that will happen again, it is very likely that this final rule will be litigated.

Key Takeaways:

Employers would be well served to review the changes to the required salary levels to satisfy the executive, administrative, and professional exemption, and the highly compensated employee exemption to the Fair Labor Standards Act. Employers may determine that certain employees either need to be classified as non-exempt due to not meeting the increased salary requirements or need to have their salaries increased to keep the employee qualified as exempt.

The information provided is a summary of laws and regulations relating to employee benefit plan compliance. This information should not be construed as legal advice. In all cases, employers should consult with their own legal counsel.

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