New overtime rules are coming into effect for every “white-collar” employee in the United States, and the trade industry is not exempt! Your field technicians and tradespeople will be unaffected by the changes, but many office staff will be. So read on as we outline everything you need to know to legally comply with the Department of Labor’s (DOL) new overtime rules.
If you aren’t currently up to date with the DOL announcement about changes to employee overtime, don’t worry. We’ll cover what’s changing, which individual employees in your trade business may be exempt, and what trade business owners and operators need to know and do before the new changes come into effect on July 1st, 2024.
Here is a short summary of what’s changing:
Firstly, the minimum pay threshold for salaried “white collar” employees to qualify for overtime is rising. This new overtime rule covers anyone in your business classified as executive, administrative, professional, or computer-based. As a result of these new changes, anyone who falls under the threshold MUST be paid overtime if they exceed 40 hours of work a week.
Secondly, the DOL has also increased the total annual compensation level to be exempt from overtime and minimum wage requirements under the “Highly Compensated Employee” (HCE) exemption. This is a special rule for, you guessed it, highly paid employees. The minimum salary threshold for employees to be exempt from overtime pay under the HCE system is also rising.
These rules and the changes to them are contained in the Fair Labor Standards Act (FLSA), but we’ll lay out all the important details for you in a comprehensive guide below:
Changes to the DOL’s Overtime Rules
What is the DOL’s 2024 final overtime rule?
The DOL’s final overtime rule revises the Fair Labor Standard Act’s overtime exemptions for executive, administrative, professional, and highly compensated employees.
According to the DOL overtime rule change page, “The final rule will increase the standard salary level and the highly compensated employee total annual compensation threshold.”
In short, this means that you, as the employer, must decide whether to increase the salaries of your office staff who fall under the threshold or start paying them overtime if they work more than 40 hours per week.
We’ll cover the numbers in a second, but first, let’s answer an important question.
Why does the new DOL final rule apply to the trade industry?
Every decently sized trade business needs office and administrative staff to keep things running. Some businesses even employ operations managers, project managers, executives and assistants. The DOL classifies many of these job roles as “white-collar”, and no matter how small a part of your trade business they are, they will be affected by the new overtime rules.
As we mentioned earlier in the article, the Department of Labor's new overtime rules will not affect your field team of techs, tradespeople and laborers, only your office team.
What is the current overtime rule?
Salaried workers who make less than $684 per week ($35,568 per year) must be paid overtime for time worked in excess of 40 hours per week.
What is the new DOL overtime rule in 2024?
From 1st July 2024, salaried workers who make less than $844 per week ($43,888 per year) must be paid overtime for time worked in excess of 40 hours per week.
Don’t worry about pulling out a calculator. That’s an increase of $160 per week or $8,320 per year.
Is the new DOL overtime rule final?
Unfortunately, this new overtime rule is just the first wave of changes to FLSA laws, with another adjustment coming at the beginning of 2025.
From 1st January 2025, salaried workers who make less than $1,128 per week ($58,656 per year) must be paid overtime for time worked in excess of 40 hours per week.
Will the new overtime rules change again?
Again, it’s probably not the news you wanted to hear, but the DOL has clarified in the new rule that they will adjust the thresholds far more often.
According to the DOL's comments, starting on 1 July 2027, the salary threshold will be “updated to reflect current earning data” every three years.
That means you should expect changes to overtime thresholds to become a standard part of running your business.
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Does the new DOL final rule affect every state?
Some states already exceed the minimum thresholds for the new DOL overtime rules. These are:
Alaska: $938.40 per week ($48,796.80 per year)
California: $1,280 per week ($66,560 per year)
Colorado: $1,057 per week ($55,000 per year)
Washington: $1,302 per week ($67,724 per year)
New York: $1,200 per week ($62,400 per year)
Upstate New York: $1,124 per week ($58,474 per year)
If your business operates out of any of these states, congratulations. You’re already meeting your contributions and don’t need to worry about DOL overtime rule changes on July 1st, 2024.
However, the slated changes for January 1st, 2025, will affect some states on the list above. Alaska, Colorado and Upstate New York will all fall under the $1,128 per week threshold, so make sure to keep track of when these changes are happening if you operate out of these states.
Changes to the Highly Compensated Employee (HCE) exemption
The DOL also increased the total annual compensation level to be exempt from overtime and minimum wage requirements under the FLSA’s “highly compensated employee” exemption.
What is the highly compensated employee (HCE) exemption?
The IRS defines a highly compensated employee (HCE) as an individual who either:
- Is paid more than a set dollar amount (determined by the DOL)
Or
- Owns more than 5% of the business that pays their salary any time during the year or the preceding year, regardless of the compensation received.
This can be a sticking point for the construction industry in particular, as many “white-collar” jobs in the average construction business can be held by part-owners of the company in question (directors, partners, executives, leadership).
As for the exact dollar amount that defines a highly compensated employee, that’s what’s changing, and we’ll go through it all below.
What is the current salary limit for HCE?
The current total annual compensation level to be exempt from overtime and minimum wage requirements under the FSLA’s “highly compensated employee” exemption is $107,432 per year, which includes at least $684 per week paid on a salary or fee basis.
But this will change once the new overtime rules take effect on July 1st, 2024.
What is the new salary limit for HCE?
From July 1, 2024, the new total annual compensation level to be exempt from overtime and minimum wage requirements under the FLSA will be $132,964 per year, including at least $844 per week paid on a salary or fee basis.
Is the new salary limit for HCE final?
No, similar to how the Overtime Final Rule is changing, the total annual compensation level to be exempt from overtime and minimum wage requirements under the FSLA will change again on January 1, 2025. From then onwards, it will be $151,164 per year, including at least $1,128 per week paid on a salary or fee basis.
HCE exemption thresholds will also be adjusted to a higher amount “to reflect current earning data” on July 1, 2027, with adjustments made every three years, exactly like with the Overtime Final Rule.
What Trade Business Owners need to do before the DOL overtime change in 2024
Finally, we’ve reached the part of the article where it’s time to do something rather than read about boring overtime laws.
Here’s what you need to do before July 1st, 2024:
Determine who is exempt from the new DOL final rule
Start the process of going through your staff and checking individual salaries to make sure all your employees are at or above the new overtime rule of $844 per week ($43,888 per year) or $132,964 per year, including at least $844 per week paid on a salary or fee basis in the case of HCEs.
Prepare for these changes before they come into effect
If you discover any of your employees are below the new overtime rule rate, it’s time to think about what to do next. Either scale up their salary to meet the overtime threshold or start paying them overtime once they exceed 40 hours of work per week.
Explain the changes to your employees
Either individually or as a group, inform your employees about the changes that are happening and be completely transparent about what’s happening and how it affects them. In the case of larger businesses, give your managers fair time to inform their subordinates and answer any questions they may have. Legal changes concerning pay can be scary for employees, even if the changes are 100% for their benefit.
Use ClockShark to ease the burden of the new DOL final overtime rule!
That’s it. This is everything you need to know about the DOL’s new overtime rule. We’ll keep this short, but it’s worth mentioning our time-tracking software, ClockShark. While you’re busy figuring out who in your office team is affected by the new overtime rules, our time tracking and reporting app can help make timesheets and payroll for your field team much easier. Check out what we can do for you, and don’t forget that the new DOL overtime rules come into effect on July 1st, 2024!
