Federal Government Raises Overtime Threshold

The Department of Labor (“DOL”) issued the final rule to increase compensation thresholds for overtime eligibility. According to Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees, effective July 1, 2024, the salary threshold will increase to the equivalent of an annual salary of $43,888 and increase to $58,656 on January 1, 2025.

The July 1 increase updates the present annual salary threshold of $35,568 based on the methodology used by the prior administration in the 2019 overtime rule update. On Jan. 1, 2025, the rule’s new methodology takes effect, resulting in the additional increase.  Starting July 1, 2027, salary thresholds will update every three years, by applying up-to-date wage data to determine new salary levels.

“This rule will exponentially increase operating costs for small business restaurant owners who are trying desperately to maintain menu prices for their customers," Sean Kennedy, executive vice president of Public Affairs for the National Restaurant Association, said in a statement."And because DOL created a one-size-fits all rule based on national income data, rather than regional data, this change is going to disproportionately impact restaurant owners in the South and Midwest. The Association and Restaurant Law Center pushed back on a significant increase following so soon after an increase just four years ago. Business conditions have changed significantly for restaurant operators in that time. It’s unfortunate that DOL did not heed our concerns, especially as it relates to regional discrepancies and the burden of automatic increases every three years.”

The DOL said it conducted extensive engagement with employers, workers, unions and other stakeholders before issuing its proposed rule in September 2023, and considered more than 33,000 comments in developing its final rule. 

Previously, DOL estimates that this change would impact 3.6 million employees, and create an additional $1.2 billion paid to employees.