The U.S. Department of Labor (DOL) has released the anticipated final rule defining Overtime Exemption requirements, including guaranteed salary requirements, for the White-Collar Exemptions: Executive, Administrative, Professional, and Highly Compensated.

Key provisions of the final rule are as follows:

1. Effective July 1, 2024, the new guaranteed salary level to be exempt is $43,888.00.
2. Effective January 1, 2025, the salary requirement will be increased to $58,656.00.
3. The salary requirement will then automatically increase every three (3) years.
4.  For the Highly Compensated Exemption. First, on July 1, 2024, the salary threshold will rise from $ 107,432 to $132,964 per year. Second, on January 1, 2025, it will rise to $151,164 per year. The threshold will also be updated every three years.

Of noted importance, is the ability for employers to apply Non-Discretionary Bonuses and Incentive Payments (including a valid commission payment) to satisfy up to 10% of the guaranteed salary level requirement of $43,888.00 and then against future salary requirement increases. Please note that Non-Discretionary Bonuses and Incentive Payments, such as commissions, must be well defined and meet the DOL’s requirements under the regulation.

Have your HR contractor conduct an audit of all pay plans and subsequent exemption compliance. With this news, employees will be interested in challenging their pay plans and eligibility for significant overtime payments.

Consider pay plan options:

1. Increase the current salary in one fell swoop to the new required level and in future years.
2. Consider the use of the Fluctuating Work Week method of payment. Strongly recommended for consideration.
3. Revise the current salaried pay plan to a hourly plan, with overtime paid at 1.5 times the regular rate for hours worked over 40 in a workweek. Work schedules must be challenged to avoid significant increases in labor costs, re, overtime.
4. Consider commissioned based pay plans or salary/hourly plus commissions to avoid overtime requirements, re: Retail 7i exemption. In states where allowed.
5. Apply other available overtime exemptions.

If you have further questions, SESCO clients receive a wage and hour compliance assessment at a CATA member discounted rate. Feel free to contact their experts at 423-764-4127 or email sesco@sescomgt.com.