May 13, 2024
By Barrie Charapp Beaty
Charapp & Weiss, LLP
bbeaty@cwattorneys.com
On April 23, 2024, the Department of Labor released the final rule that defines the overtime exemptions for white collar employees Fair Labor Standards Act (FLSA).
Effective on July 1, 2024, the final rule raises the annual salary threshold from $35,568 to $43,888 for employees who are exempt from overtime pay due to administrative, executive, professional, and outside sales professional exemptions.
This means that for employees to be exempt from overtime pay for the administrative, executive, professional, and outside sales professional exemptions, the employee needs to earn no less than $43,888 a year. On January 1, 2025, the threshold salary requirement increases to $58,656.00.
What are the qualifications for an employee to be administrative, executive, or professional exempt?
Job titles do not determine if an employee is exempt. To determine if an employee meets the administrative, executive, and professional exemption, the following three factors must be satisfied:
- paid a salary, (as of July 1, 2024, the salary should be $844 per week, which is equivalent to $43,888 per year);
- the employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
- the employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significances.
The employee’s “primary duty” is the main or most important duty performed by that employee. The employee’s primary job must be related to assisting with running or servicing of the business for the duty to be “directly related to the management or general business operations,” and includes but is not limited to work in areas such as tax, finance, accounting, budgeting, quality control, purchasing, advertising, marketing, personnel management, human resources, employee benefits, computer network administration, and compliance. If the employee exercises discretion or authority to make independent choices, without immediate direction from his or her boss or supervisor, the employee’s job includes the exercise of discretion and independent judgment.
Whether a decision by an employee could be reviewed and reversed by a boss is not determinative if the employee has independent judgment in his or her work function.
What about the salaries for “highly compensated employees”?
Under the final rule, the DOL also increased the annual salary requirements from $107,432 to $132,964 per year, (including at least $844 per week paid on a salary or fee basis) for the “highly compensated employee” exemption as of July 1, 2024. On January 1, 2025, the threshold salary requirement for “highly compensated employee” increases to $151,164 per year, including at least $1,128 per week paid on a salary or fee basis.
Under the FLSA, an employee must meet the following requirements to be deemed exempt from overtime pay as a “highly compensated employee.”
- The employee’s annual salary must be $132,964 (as of July 1, 2024) or more per year.
- The employee’s job is mostly non-manual labor work or office work; and
- The employee customarily and regularly performs at least one of the exempt duties or responsibilities of an exempt executive, administrative or professional employee.
How does this rule affect dealerships?
For dealerships, the final rule does not affect many employees.
If you have an employee who is exempt currently because of the administrative, executive, and professional exemption, this rule does not change how that person is qualified for the exemption other than the dealership needs to review the person’s salary. If the employee is currently an administrative, executive, professional exempt employee and earns the minimum salary ($35,568), the dealership either keeps the person at his or her current salary and pay overtime or raise the person’s salary to $844 per week, which is equivalent to $43,888 per year on July 1, 2024.
Additionally, this rule does not affect other dealership employees such as those employees that are exempt under the salesman, partsman, service advisors or mechanic exemption of the FLSA.