Last month, the Department of Labor issued a final rule on changes to the overtime regulations. Currently, employees earning at least $684 per week ($35,568 annually) and performing executive, administrative, or professional duties are exempt from overtime.
Key changes to the minimum salary threshold are as follows:
· July 1, 2024: Threshold increases to $844 per week ($43,888 annually).
· January 1, 2025: Threshold increases to $1,128 per week ($58,656 annually).
· Starting July 1, 2027: Thresholds will be updated every three years to keep pace with salary changes.
Employers should review if salaried employees pass the duties test for exempt status. In the hospitality industry, employees typically qualify under executive or professional duties tests.
Executive Employee Exemption Requirements:
1. Primary duty must be managing the enterprise or a department.
2. Must regularly direct the work of at least two full-time employees.
3. Must have authority over hiring or firing decisions, or their suggestions must carry significant weight.
Learned Professional Exemption Requirements:
1. Primary duty must involve work requiring advanced knowledge.
2. Advanced knowledge must be in a recognized field of science or learning.
3. Knowledge must be acquired through specialized academic training.
For chefs, those with a four-year degree in culinary arts generally meet the learned professional exemption, while cooks performing routine tasks do not.
To comply, employers have three options:
1. Pay employees at the new thresholds and ensure they pass the duties test.
2. Reclassify employees as non-exempt salaried, requiring time tracking and overtime pay.
3. Reclassify employees as non-exempt hourly.
Legal challenges may affect the implementation of these changes. Updates will be provided as necessary.
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