Update: November 2024

A Texas federal judge has blocked the Biden administration’s overtime rule that is detailed in the blog article below, ruling the Department of Labor overstepped its authority. As a result, the previous threshold of $35,568 will remain in effect. The future of the rule is uncertain as the Department of Labor considers its next steps. Stay tuned for further updates.

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Beginning July 1, 2024, salaried “white collar” workers earning less than $43,888 will be eligible for overtime pay. The ruling, announced on April 23, 2024, is designed to “expand overtime protections for millions of the nation’s lower-paid salaried workers,” stated a White House press release.

The $43,888 threshold is an $8,320 increase over the existing $35,569 limit, which was established in 2019. The minimum amount is set to further jump to $58,656 on Jan. 1, 2025, and will increase every three years thereafter. 

“The Department of Labor is ensuring that lower-paid salaried workers receive their hard-earned pay or get much-deserved time back with their families,” said Jessica Looman, wage and hour administrator. “This rule establishes clear, predictable guidance for employers on how to pay employees for overtime hours and provides more economic security to the millions of people working long hours without overtime pay.”

The Department of Labor estimates the rule will make 4 million workers newly entitled to overtime protection in its first year, resulting in an income transfer of around $1.5 billion from employers to workers.

“This rule will restore the promise to workers that if you work more than 40 hours in a week, you should be paid more for that time,” said Julie Su, acting secretary. “Too often, lower-paid salaried workers are doing the same job as their hourly counterparts but are spending more time away from their families for no additional pay. That is unacceptable. The Biden-Harris administration is following through on our promise to raise the bar for workers who help lay the foundation for our economic prosperity.”

Under the Fair Labor Standards Act (FLSA), certain salaried employees are exempt from federal minimum wage and overtime requirements if they are employed in a bona fide executive, administrative, or professional (EAP) capacity. This is sometimes called the “white collar” exemption. Salary alone does not determine whether an employee qualifies for a white-collar exemption. To be eligible for an exemption, an employee’s primary job duties must meet the applicable duties tests listed here. 

Whenever any major labor law shift occurs, there’s always the risk of litigation, which may lead to a delay or tabling of the law. The last time the Department of Labor sought a significant overtime eligibility increase was in 2016, and federal courts blocked the rule eight days before it was set to go into effect.

Another delay may result from a letter sent from a group of 88 businesses to the Department of Labor pleading for more time, stating the implementation date of July 1, 2024, does not give them enough time to respond adequately. 

Federal Law vs. State Law

While the FLSA sets a baseline for overtime requirements at the federal level, states have the authority to establish their own overtime thresholds – the Department of Labor’s Final Rule does not trump state or local overtime laws. 

For example, as of 2024, California’s minimum salary threshold for exempt executive and administrative employees is $66,560 for standard executives and $115,763.35 for computer software executives. In New York, the overtime threshold differs by county. The threshold for standard executives is $58,500 in New York City, Nassau, Suffolk, and Westchester; and $55,341 in the remainder of the state. Those figures, as long as they remain greater than the federal amount, will remain in place. 

Manage Overtime with OnTheClock

This overtime threshold increase may force company leaders to make some difficult business decisions: Should owners raise employees’ salaries to keep them exempt from overtime pay, hire additional workers, or shuffle responsibilities to avoid employees working overtime? 

Another simple and easy-to-implement solution may lie in managing employee hours through the use of a digital time tracking system. OnTheClock is a multifaceted time tracking tool that offers numerous benefits, including: 

Overtime Settings: OnTheClock offers a variety of ways for companies to manage employees’ overtime hours. Users assigned as administrators in OnTheClock have the ability to configure overtime settings based on their companies' policies and compliance requirements. Administrators can define overtime rules, including the threshold for overtime hours, overtime pay rates, any applicable exemptions, etc. 

Automated Overtime Calculations: Once overtime settings are configured, OnTheClock automatically calculates overtime hours and rates based on employees' time entries. This eliminates the need for manual calculations and reduces the risk of errors associated with overtime pay.

Overtime Alerts: OnTheClock can send alerts or notifications to administrators when employees approach or exceed overtime thresholds. This allows managers to monitor hours in real time and proactively manage overtime costs effectively.

Overtime Reports: OnTheClock provides comprehensive reporting tools that allow administrators to track and analyze overtime usage across the organization. Managers can generate overtime reports to identify trends, monitor compliance with overtime policies, and make data-driven decisions to manage overtime effectively.

Employee Scheduling: OnTheClock's scheduling feature enables managers to create and manage employee schedules while accounting for overtime constraints. Managers can schedule employees' shifts to minimize overtime hours or distribute overtime evenly among eligible employees.

Conclusion

Ensuring your employees are working the proper hours and meticulously tracking hours to limit unnecessary overtime expenditures will be crucial as these new thresholds take effect. 

OnTheClock is designed to help companies effectively navigate new overtime laws, minimize compliance risks, and ensure employees are compensated fairly and accurately. Utilizing the software’s overtime alerts and reporting features will ensure you refrain from paying any unnecessary overtime compensation – even if more of your employees are eligible for overtime due to this new labor law. 

Come experience digital time tracking and learn why 18,000 companies rely on OnTheClock daily. Sign up for a free 30-day trial today!