We’ve used this space on occasion to discuss overtime rules under the Federal Fair Labor Standards Act. It’s important to revisit since the U.S. Department of Labor changed the overtime exemption rules in the FLSA effective July 1, 2024. Under the revised overtime exemption rules, fewer workers will be exempt from overtime pay, potentially raising labor costs for a broad range of employers.

Overtime primer

Regardless of whether they are paid on an hourly or salary basis, all employees are entitled to be paid overtime unless they qualify for an FLSA exemption. Overtime pay is 1.5 times the employee’s normal pay rate for every hour over 40 that the employee works in a given week. Whether an employee is exempt depends on the type of work they perform and the amount the employee is paid.

Type of work performed

The new rule doesn’t make direct changes to the available exemptions. To determine whether an employee is exempt, employers must look at their duties. Employees who primarily perform manual labor (e.g., shoveling, driving vehicles, etc.) are not exempt. Some exemptions can be applied, however, for managers or office workers.

The most frequently used overtime exemptions for snow industry employees are:

Managerial: Employees 1) who primarily manage the company or one of its departments or subdivisions; 2) who manage at least two full-time employees; and 3) whose earnings exceed at least the standard salary level (SSL).

Administrative: Employees 1) who primarily perform office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; 2) whose job includes the exercise of discretion and independent judgment regarding significant matters; and 3) whose earnings exceed at least the SSL.

Professional: Employees who primarily perform work that requires 1) advanced knowledge in a field of science or learning or 2) invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor; and 3) whose earnings exceed at least the SSL.

New minimum pay threshold

Under the new rules, the SSL will be raised from $684 to $844 per week. That means that an employee who earns less than $844 per week ($43,888 per year for year-round workers) cannot be exempt from OT, even if they would otherwise qualify. Further, the rule raises the minimum salary per week to $1,128 ($58,656 per year for year-round workers) beginning January 1, 2025.

Starting July 1, 2027, these earnings thresholds will be updated every three years to keep pace with changes in worker salaries, ensuring that employers can adapt more easily because they’ll know when salary updates will happen and how they’ll be calculated.

New HCE threshold

The FLSA allows employers to avoid paying overtime to highly compensated employees when their earnings exceed the HCE exemption level, their primary duties do not include manual labor, and they regularly perform at least one of the FLSA’s exempt duties for executives, administrators or professional employees.

The new rule raises the HCE exemption level from $107,432 per year to $132,964 on July 1 and to $151,164 per year on January 1, 2025.

Court challenge is likely

Court challenges could delay or prevent the rule from taking effect. Watch this space for future updates should the rule be put on hold or prevented from taking effect. Be sure to review your employee status and adjust compensation as needed. For more information, visit www.dol.gov or contact an attorney.

This article provides general information on business and employment matters and should not be relied upon as legal advice. A qualified attorney must analyze all relevant facts and apply the applicable law to any matter before legal advice can be given.

Jared Nusbaum is an attorney with Zlimen & McGuiness, PLLC in St. Paul, MN. His practice areas include employment law, small business law, litigation, and bankruptcy. Email him at jnusbaum@zmattorneys.com.