Are You Ready for the DOL’s New Overtime Rule?
It seems there is no rest for HR professionals. With a new year fast approaching, employers face a new administrative challenge, courtesy of the Department of Labor (DOL)—the implementation of its new Overtime Rule, set to take effect on Jan. 1, 2025. The rule aims to make millions more workers eligible for overtime pay by increasing the salary threshold for the executive, administrative and professional (EAP) exemptions under the Fair Labor Standards Act (FLSA).
Announced on April 23, 2024, the new Overtime Rule raises the salary threshold for EAP overtime exemptions from $43,888 to $58,656 per year. The threshold for the highly compensated employee (HCE) exemption will jump from $132,964 to $151,164. In a blog post released concurrently with the new rule, the DOL explained its reasoning: “While the Department increased the minimum salary required for the EAP exemption from overtime pay every 5 to 9 years between 1938 and 1975, long periods between increases after 1975 have caused an erosion in the real value of the salary threshold, lessening its effectiveness in helping to identify EAP employees.”
What does this change mean for your organization? More work for HR, of course! If you haven’t already done so, you will need to identify all of your employees who you are treating as exempt under the current threshold. For those who earn less than $58,656 annually (or $151,164 for HCE), you’ll need to decide how to implement the new rule. For employees whose compensation is close to the new thresholds, it may be simplest to increase their pay to meet the exemption. For others, you may decide to keep them on a salary but eliminate any hours over 40 in a workweek; or you should prepare to pay them overtime. The best approach may depend, in part, on how much overtime the employee typically works.
Either way, you’ll need to be prepared to start tracking the time of any employees whose salary no longer meets the exemption threshold. Under the FLSA, an employer must keep accurate records of all time worked. You may choose to do this using a time clock, timesheet system other time tracking applications, or for employees who work on a regular schedule, you can keep a record of their regular schedule along with a system for reporting exceptions to those work hours. Because tracking their time may be new to employees who have previously been overtime exempt, you will need to include training in your preparations. Many EAP employees are accustomed to performing work tasks outside of regular work hours, such as reading and responding to e-mail or text messages. All of that time will need to be recorded to avoid wage and hour violations.
As you make preparations to implement the salary threshold increase, it may be a good time to assess whether an EAP employee’s actual job duties still meet the job duties test for overtime exemption. Although the DOL’s job duties tests have not changed, sometimes a position evolves in a way that varies from the job description. It’s critical to remember that for an employee to be an exempt EAP, both the job duties and the salary basis tests must be met.
One final and important note—there is litigation currently pending that seeks to enjoin the DOL from implementing the new rule. Two of the cases were brought in federal district courts in Texas and one was filed in Tennessee but later transferred to the federal district court in Washington, D.C. Although one of the Texas courts issued an order enjoining enforcement of the rule as to the state of Texas only, the others have not yet ruled. The Employment Law Update will report on any developments in the coming months. Meanwhile, employers who have questions about implementing the new overtime rule may wish to review this FAQ document prepared by the DOL.
EEOC’s Fiscal Year 2024 Litigation Report Reveals Focus on PWFA as an “Emerging Issue”
On Oct. 9, 2024, the Equal Employment Opportunity Commission (EEOC) released its Fiscal Year 2024 report outlining its litigation efforts over the past year. EEOC filed 110 lawsuits against employers “challenging unlawful employment discrimination” and “placing an emphasis on emerging issues and advancing the employment rights of underserved and vulnerable workers,” according to a press release. Among the cases pursued by the EEOC were the agency’s first cases asserting claims under the Pregnant Workers Fairness Act (PWFA). The PWFA took effect last year and requires employers to provide accommodations for employees who experience limitations due to pregnancy, childbirth or related medical conditions (including breastfeeding), unless providing the accommodation would create undue hardship. Like other federal anti-discrimination laws, it applies to employers with at least 15 employees. The EEOC said it “focus[ed] on enforcing the PWFA as an emerging issue. At the forefront of enforcement of the new law, the Commission’s lawsuits allege employers failed to provide reasonable accommodations to workers who were entitled to them and often discharged employees as a result.”
In the month of October, the EEOC has announced that it resolved two PWFA cases, one of which resulted in the employer paying the employee damages of $100,000 after it allegedly denied her time off from work to recover and grieve the loss of a stillborn baby. The other resulted in a payment to the employee in an amount not disclosed as well as an agreement to provide training to all employees, appoint an EEO coordinator and report any complaints of discrimination annually to the EEOC.
The litigation report also disclosed 48 cases brought under the Americans with Disabilities Act, 40 cases alleging retaliation, seven Age Discrimination in Employment Act cases, five sexual harassment cases involving teenage employee victims and seven cases alleging discrimination based on sexual orientation or gender identity. The EEOC vowed to “continue to deploy [the tool of litigation] to strategically maximize [its] impact.”
NLRB Reports Surge in Union Petitions and Unfair Labor Practice Charges
Last week, the National Labor Relations Board (NLRB) announced a significant increase in union election petitions filed with the agency. The Board received 3,286 petitions during Fiscal Year 2024, which ended on Sept. 30, 2024. This number reflects a 27% increase in Union election petitions over Fiscal Year 2023, and is more than double the number of petitions filed just three years before in Fiscal Year 2021.
Workers were not solely focused on union organizing, however. The Board also received more unfair labor practice charge filings this year at 21,292 cases. Combined filings represent the Board’s “highest total intake in over a decade,” according to its press release. NLRB General Counsel Jennifer Abruzzo and Chairman Lauren McFerran pointed to the Board’s increasing case load as support for their request that Congress increase NLRB funding and noted that while the Board issued more decisions in FY 2024 (259) than the year before, it still has a substantial backlog of cases. In fact, the NLRB ended the year with 288 pending cases, compared with 197 at the end of FY 2023.
These marked increases in both union organizing and unfair labor practice charge filings serves as an important reminder for employers that regardless of whether their workforce is currently unionized, the National Labor Relations Act (NLRA) provides significant rights to their employees. The current NLRB has aggressively sought to enforce these rights, both in unionized and non-union workplaces. The authors of the Employment Law Update have recently noted an increase in NLRB charge filings related to employer handbook policies and work rules. Employers with questions about NLRA compliance should consult with experienced counsel.
