Ask an HR Pro: What Do I Need to Know About the New FLSA Overtime Rule?

On Tuesday, April 23, 2024, the U.S. Department of Labor announced a final rule that updates exemption thresholds for overtime eligibility under the FLSA.

We asked iHire’s Senior HR Consultant, Chrisanne Bowden, to give us a high-level overview of the new rules for overtime pay and advice on how employers can best prepare.

Q: What is included in this new FLSA overtime rule?

CB: Back in August, the Department of Labor proposed an increase to the FLSA’s annual salary-level threshold from $35,568 to $55,068. On Tuesday, the Biden-Harris Administration announced that effective July 1, 2024, the salary threshold will increase to $43,888; on January 1, 2025, it will increase again to $58,656. This change would restore and extend overtime protections to millions of salaried workers. Additionally, starting July 1, 2027, the rule would provide for automatic updates to the threshold every three years moving forward to reflect current earnings data.

Q: How do I know if my organization is covered by FLSA?

CB: Your organization is a covered business if you have gross revenue of at least $500,000 or you have an individual employee who engages in interstate commerce. And based on how the DOL defines “interstate commerce,” the law covers nearly all workplaces.

Q: What should I do to prepare?

CB: First, audit all your positions and update job descriptions if needed to ensure your team members are classified correctly as exempt or non-exempt. Next, identify employees who are currently exempt and earning less than the new threshold, as they will be your impacted cohort. Get a sense of how much overtime this group is working and conduct a financial analysis to understand the impact of that overtime. Finally, get time and attendance tracking in place to meet FLSA requirements.

Q: What strategic decisions can we make in response to the new overtime rule?

CB: There are a few moves you could make. You could convert impacted employees to non-exempt status and pay overtime, or increase their salaries to meet the new threshold. You could also continue to pay those employees on a salary basis instead of hourly, but you still have the other obligations that go along with non-exempt status such as tracking time and paying overtime. Hiring fewer full-time workers, hiring more part-time workers, and/or realigning workloads are other possible options. Regardless, carefully consider how these decisions will impact morale and productivity.

Q: What’s the best way to communicate new rules for overtime pay to my employees?

CB: If the rule does go into effect, notify your leadership team and reclassified employees as soon as possible. Prepare detailed talking points and try to anticipate questions and concerns. For example, those that are changing from exempt to non-exempt may be unhappy about how their role could now be perceived, as well as the burden of having to track their time.

For a deeper dive, check out the on-demand recording of our webinar, “(Over)time Is Money: Changes to the FLSA Overtime Rules,” from last fall. You can also schedule a free consultation with our HR Services & Consulting team for additional support and guidance on FLSA and other compliance matters.