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Many more American workers will be eligible for overtime pay starting this summer unless they get a substantial raise.  

The U.S. Department of Labor issued a rule on April 23, setting a new minimum salary rate of $43,888 per year ($888 per week) for overtime exemption, effective July 1.  Right now, the minimum is $35,568 per year ($684 per week).  Starting on January 1, 2025, under the new rule, the minimum will go up again, to $58,656 per year ($1,128 per week).

Workers with qualifying duties under the executive, administrative, and professional (“white collar”) exemptions have to be paid on a salary basis (essentially, the same amount each week that any work is performed, no matter how much or how little work is done) at a qualifying rate.  The exemption relieves the employer from the duty to pay 1 ½ the regular hourly rate for all time over 40 hours worked in a week. The January salary threshold rise will affect some 3 million workers, DOL estimates.  That rate is designed to match the 35th percentile of full- time salary earnings in the lowest paid U.S. Census region, the South.  

Non-Connecticut employers can sometimes take advantage of an exemption from overtime pay for highly compensated non-manual workers with at least one “white collar’ job responsibility if they earn at or above a six-figure annual threshold, part of which must be in the form of salary.  The new rule raises that figure as well, from the current $107,432 to $132,964 in July, and $151,164 in January.  Here the design is to track the 85th percentile of nationwide earnings.   

Automatic upgrades will occur every three years based on current earnings data under the new rule.  

Employers should immediately assess the impact of this change on their operations.  Effective responses can vary from raising salaries to meet the new thresholds, to limiting overtime work, to redistributing duties for more efficiency.  

Compliance with wage regulation is critical for business.  Enforcement activity by State and federal agencies appears to be on the rise, as do cases brought by workers, both individually and on a class basis.  Remedies for non-compliance can be expected to be more expensive than initial compliance. Triple damages can be awarded for willful violations of the wage and hour laws, as can attorneys’ fees and costs.  The employer’s own defense costs in administrative and court proceedings can be substantial.   Why not try to do it right in the first place?

The DOL’s new rule is certain to be challenged in court cases by industry groups supported by many lawmakers.  Compliance won’t be excused by the pendency of any such court challenge unless some injunction is issued by a court and then, likely only in the jurisdiction of that court.