Administration Finalizes Rule on Salary Thresholds for OT Pay Exemption

April 25, 2024

On April 23, 2024, the Biden-Harris Administration unveiled the long-awaited update in labor regulations with the finalization of a significant rule pertaining to salary thresholds for exempting salaried bona fide executive, administrative, or professional employees (EAP) from federal overtime pay requirements. Officially referred to as “Defining and Delimiting Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees”, this rule “establishes clear, predictable guidance for employers on how to pay employees for overtime hours”, according to Wage and Hour Administrator Jessica Looman.

Effective July 1, 2024, the current salary threshold of $684 per week or $35,568 per year will see a substantial increase to $844 per week or $43,888 per year. This adjustment aims to better align with modern economic realities and ensure that employees are fairly compensated for their work. However, this adjustment is just the initial phase of a broader plan for reform.

By January 1, 2025, the threshold is set to undergo another significant boost, reaching $1,128 per week or $58,656 per year. Notably, this final threshold exceeds the initially proposed figure, showcasing the Administration’s commitment to robust wage standards. It’s worth highlighting that there was anticipation surrounding the potential for a higher threshold, as indicated by a clause in the proposed rule, which suggested a figure as high as $1,158 per week or $60,209 per year.

In addition to adjustments for salaried employees, the rule also raises the salary thresholds for qualifying as a Highly Compensated Employee (HCE) from $107,432 to $151,164. This revision represents a notable increase from the previously proposed threshold, underscoring the Administration’s efforts to ensure equitable compensation across various employment categories.

Bill Dombi, President of the National Association for Home Care & Hospice (NAHC), emphasized the significance of this rule for the home care community, saying “(w)e strongly advise the home care community to gain a comprehensive understanding of the rule and institute steps for timely compliance. While the changes may have limited impact on most home care companies, noncompliance comes with serious penalties.”

The finalization of this rule is expected to face legal challenges. Several extension requests were filed in September 2023, signaling potential opposition from various quarters. As the implementation of the rule progresses, it is likely to be met with scrutiny and debate, similar to how the Obama-era DOL’s finalized salary threshold rule was halted by a federal judge hours before it was set to take effect. Acknowledging that this new rule will face similar challenges, Biden administration officials say they believe the policy will hold up in court.

NAHC will continue to monitor developments in this rule. You can access the complete rule here.