Employment Alert by Lamb McErlane attorneys Vasilios J. Kalogredis, Esq. and Sonal Parekh, Esq.

On April 23, 2024, the U.S. Department of Labor (“DOL”) released their final rule, Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees (“Final Rule”), which updated the Fair Labor Standards Act (“FLSA”)’s requirements relating to overtime pay.

Currently, the FLSA provides that unless exempt, employees covered by the FLSA must receive overtime pay equal to at least 1.5 times their regular rates of pay for hours worked over 40 in a workweek. The FLSA does not require overtime pay for work on Saturdays, Sundays, holidays, or regular days of rest, unless overtime hours are worked on such days. The overtime rules apply on a workweek basis, which consists of a fixed and regularly recurring period of 168 hours, regardless of which day and/or hour it began. Section 13(a)(1) of the FLSA exempts from the minimum wage and overtime pay requirements “any employee employed in a bona fide executive, administrative, or professional capacity” (“EAP Employees”) (the “EAP Exemption”). For the EAP Exemption to apply: (1) the employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (the “Salary Basis Test”); (2) the amount of salary paid must meet a minimum specified amount (the “Salary Level Test”); and (3) the employee’s job duties must primarily involve executive, administrative, or professional duties as defined by the regulations (the “Duties Test”). Similarly, the DOL provides an exemption for highly compensated employees (“HCE”) (the “HCE Exemption”).

The Final Rule updates and revises the regulations issued under the EAP Exemption. Revisions include increases to the standard salary level and the HCE total annual compensation threshold, and adding a mechanism that provides for the timely and efficient updating of these earnings thresholds to reflect current earnings data.

The Final Rule will ultimately set the standard salary level at the 35^th percentile of weekly earnings of full-time salaried workers in the lowest-wage Census Region ($1,128 per week or $58,656 annually) and the HCE total annual compensation threshold at the annualized weekly earnings of the 85^th percentile of full-time salaried workers nationally ($151,164). To help transition, the DOL will have two increases, effective July 2024 and January 2025, respectively.

The standard salary level for the EAP Exemption is currently $648 per week, or $35,568 per year, and the total annual compensation level for HCEs is currently $107,432. Using the DOL’s current methodology, the Final Rule will increase the minimum salary threshold for exemption from overtime to $43,888 per year (or $844 per week) and the HCE total annual compensation to $132,964 per year, effective July 1, 2024. Then, effective January 1, 2025, using the DOL’s preferred methodology, the Final Rule will increase the minimum salary threshold for exemption from overtime to $58,656 per year (or $1,128 per week) and the HCE total annual compensation to $151,164 per year. Future updates to the standard salary level and HCE total annual compensation threshold with current earnings data will begin 3 years after the date of the initial update (July 1, 2027), and every 3 years thereafter, using the methodologies in place at the time of the updates. It is the DOL’s position that the new updating mechanism will allow for the timely, predictable, and efficient updating of the earnings thresholds.

If you have any questions or if we may be of further assistance regarding overtime rules, compliance, or other health law/employment matters, please feel free to contact Bill Kalogredis, Esq. or Sonal Parekh, Esq.

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Vasilios J. (Bill) Kalogredis, Esq. has been advising physicians, dentists, and other healthcare professionals and their businesses as to contractual, regulatory and transactional matters for 50 years. He is Chairman of Lamb McErlane PC’s Health Law Department. Bill can be reached by email at bkalogredis@lambmcerlane.com or by phone at 610-701-4402.

Sonal Parekh, Esq., is an associate at Lamb McErlane PC who focuses on healthcare transactional matters and a broad range of healthcare regulatory-related issues on behalf of healthcare systems, physicians, dentists, and other healthcare providers, and is a pharmacist by education and training. Sonal can be reached by email at sparekh@lambmcerlane.com or by phone at 610-701-4416.

*This alert is for educational purposes only and is not intended to be legal advice. Should you require legal advice on this topic, any health care matter, or have any questions or concerns, please contact Vasilios J. (Bill) Kalogredis, Esq. or Sonal Parekh, Esq.