Final Overtime Rule Published By Department of Labor, Effective July 1, 2024

On April 26, 2024, the U.S. Department of Labor (“DOL”) published its final rule implementing the Fair Labor Standards Act (“FLSA”), Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees, which takes effect on July 1, 2024, and has staggering effective dates thereafter.

As background, the FLSA requires covered employers, including public school districts, to pay employees a minimum wage and, for employees who work more than 40 hours in a workweek, overtime premium pay of at least 1.5 times the employee’s regular rate of pay. Section 13(a)(1) of the FLSA exempts from the minimum wage and overtime pay requirements “any employee employed in a bona fide executive, administrative, or professional capacity” (including teachers). To fall within one of the exemptions, an employee generally must meet all three tests:

  1. be paid a pre-determined, fixed salary, not subject to reduction because of variations in the quality or quantity of work performed;
  2. be paid at least a specified weekly salary level; and
  3. primarily perform executive, administrative, or professional duties, as provided in the regulations.

The Department’s regulations also provide a test for highly compensated employees who are paid a salary, earn above a higher total annual compensation level, and satisfy a minimal-duties test.

The final rule affected mainly the second prong of the above test by modifying the weekly salary level required.  More specifically, it increases the standard salary level needed for the salary-basis test from the current $684 per week (equivalent to $35,568 per year) to $844 per week (equivalent to $43,888 per year) as of July 1, 2024, and $1,128 per week (equivalent to $58,656 per year) as of January 1, 2025.   It also increases the highly compensated employee total annual compensation threshold from the current $107,432 per year to $132,964 per year as of July 1, 2024, and $151,164 per year as of January 1, 2025.  It also provides for regular updates of these thresholds in future years with the first increase on July 1, 2027, and every 3 years thereafter.

The new rule does not change anything for bona fide teachers.  Under the FLSA, teachers only have to meet the third prong above to be exempt under the FLSA and in Illinois, also meet the salary threshold requirements under the Illinois School Code and minimum wage requirements under the Illinois Minimum Wage Law. While teachers (and most school administrators) are exempt from the changes made by the final rule, the change will lead to increased overtime costs for some district employees, like athletic trainers, executive secretaries, HR Directors, buildings and grounds managers, and possibly librarians and school nurses and anyone else being treated as an “exempt” employee (rightly or wrongly).

School districts should review their job descriptions and determine the job classifications of staff members currently being treated as “exempt from overtime” and review whether they will meet the new thresholds. The rule is expected to draw legal challenges.

Contact Barb Erickson or any of our Labor/Personnel attorneys for further information.

Source: Final Rule: Restoring and Extending Overtime Protections | U.S. Department of Labor (dol.gov)