The U.S. Department of Labor (DOL) has released its Overtime Final Rule designed to update and revise overtime protections for millions of workers employed by nonprofits, for-profits, and governments. The final rule, set to start going into effect on July 1, 2024, increases the minimum salary level that white-collar employees must be paid to exempt them from overtime pay of time and half of wages for hours worked in excess of 40 in any week. Attached you’ll find our initial analysis; we’ll continue to dig into the details and share additional insights, plans for a national webinar, and more.

The Overtime Final Rule makes changes in three areas:

Standard Salary Threshold

  1. Old Rule Adjusted: On July 1, the standard salary threshold goes up to $844 per week/$43,888 per year (from the current level of $684 per week/$35,568 per year). This is essentially an inflation adjustment of the level set by the Trump Administration in 2019.
  2. New Rule Implemented: On January 1, 2025, the salary level then goes up again to $1,128 per week or $58,656 per year.
  3. Beginning July 1, 2027, the salary threshold will be automatically adjusted for inflation every three years.

Highly Compensated Employee Total Annual Compensation Threshold

The Labor Department is also adjusting the special threshold for highly compensated employees, a threshold that reduces the level of needed scrutiny about the duties the individual employees must perform to be exempt.

  1. Old Rule Adjusted: On July 1, the threshold for highly compensated employees is adjusted for inflation from the current level of $107,432 per year to $132,964 per year. This new rate also requires that the individual must be paid on a salary or fee basis of at least the new standard salary threshold ($844 per week).
  2. New Rule Implemented: Starting January 1, 2025, the threshold for highly compensated employees goes up to $151,164 per year and requires that the individuals are also paid a minimum of $1,128 per week on a salary of fee basis. The new, higher threshold in this category was originally proposed back in September at about $144,000.
  3. As with the standard salary threshold, the highly compensated employee salary threshold will be automatically adjusted for inflation every three years, beginning on July 1, 2027.

Automatic Adjustment

Finally, the new Overtime Rule includes a mechanism for the Department to adjust both the Standard Salary Threshold and Highly Compensated Employee Total Annual Compensation Threshold for inflation every three years. The next automatic adjustment will take effect on July 1, 2027.

Reading through the analysis of the Overtime Final Rule prepared by the Labor Department, it is clear that they read and relied on the views of the network of nonprofits across the country led by the National Council of Nonprofits and state associations. Citing members of the network, Labor refrained from creating carveouts and implemented a two-step phase in. They acknowledged that charitable organizations with government grants are adversely affected by the rules change but did not provide relief. We believe the acknowledgment can help our ongoing advocacy efforts going forward.

Resources: