Legislative lowdown: Department of Labor will extend overtime pay to 4 million salaried workers

Some 4 million additional salaried workers will be eligible to receive overtime pay under a final rule the Department of Labor announced on April 23.

The rule raises the annual salary threshold for white-collar (i.e. executive, administrative, and professional) employees to qualify for overtime from $35,568 to $58,656. It will be fully implemented by Jan. 1, 2025. These thresholds will be updated every three years starting in July 2027 based on current wage data.

“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,” Acting Labor Secretary Julie Su said in a statement. “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.”

How HR should prepare for new overtime rules. The degree to which your organization will be affected by these new salary thresholds may depend in part on where your employees are based, HR Brew reported last September.

In certain states, like California and parts of New York, the salary threshold for overtime is already higher than the one proposed by the federal government. As such, employers in these states are less likely to be affected by the rule, Kara Govro, principal legal analyst with Mineral, an HR and compliance firm, told us.

While the final overtime salary threshold will take effect next January, the first increase will occur on July 1, when it will be bumped up to $43,888. As employers prepare for this, they should keep careful track of workers’ hours to understand how the new overtime rule could affect their bottom line.

If employers can’t afford to raise workers’ salaries above the new thresholds, they will need to reclassify them as non-exempt hourly employees, Govro told us last year. Reclassification can be delicate, so HR should communicate clearly to employees why they’re being reclassified, and how some expectations of their job will change.

Update 04/25/24: The quotes from Kara Govro in this story had been updated with her approval to reflect that overtime pay in parts of New York, not the whole state, have higher threshold minimums than the new DOL overtime rule, and that it is up to employers to potentially re-classify employees as non-exempt hourly workers.