Court challenge looms, but employers urged to prepare for new overtime rule

by Tammy Binford

Employers are being advised to prepare for a new rule outlining which employees must be eligible for overtime pay, even though litigation threatens the U.S. Department of Labor’s (DOL) new and long-awaited regulation.

The new, two-phase approach to determining which employees are eligible for overtime pay may make the DOL’s newly issued final rule more acceptable to some employers, but a court challenge is still expected, according to attorneys who advise employers.

The new final rule, published in the Federal Register on April 26, will take effect July 1, with one salary threshold starting then and another, higher threshold set to take effect January 1, 2025.

The federal Fair Labor Standards Act requires hourly workers to earn time-and-a-half pay for hours over 40 in a workweek, but certain workers can be classified as exempt from that provision if they perform executive, administrative, or professional duties and earn at least a threshold amount.

Under the new rule, the threshold will go from $684 a week to $844 a week, or $43,888 a year, effective July 1. But the threshold will increase to $,1,128 a week, or $58,656 a year, effective January 1, 2025. The rule also stipulates that the threshold will be updated every three years.

In addition, the rule increases the threshold for certain highly compensated employees from $107,432 a year to $132,964 on July 1 and to $151,164 on January 1, 2025.

Court challenges