Department of Labor’s New Overtime Rule May Impact Some Practice Staff
Starting July 1, 2024, a rule change issued by the United States Department of Labor may impact some dental practice staff. The rule change adjusts salary thresholds for determining which employees are exempt from the Fair Labor Standards Act’s minimum wage and overtime protections. The minimum salary at which an employee can be considered exempt is now $43,888 per year, and on January 1, 2025, the minimum will rise again, this time to $58,656 per year. The Department of Labor has also announced that it is establishing a policy of updating these minimum thresholds every 3 years.
Background on the Rule Change
The Fair Labor Standards Act exempts certain employees from minimum wage and overtime protections. Section 13(a)(1) of the act exempts, “any employee employed in a bona fide executive, administrative, or professional capacity[.]” Often, the exemption is referred to as EAP, short for executive, administrative, or professional. Since 1938, when the act was passed, the Department of Labor has set regulations governing the implementation of the EAP exemption. Typically, 3 requirements must be met in order for an employee to be considered exempt: the employee must be paid a predetermined and fixed salary not subject to reduction based on the quality or quantity of work done, salaries must meet a minimum specified amount, and job duties must be EAP duties as defined by regulation.
While the 3 criteria have remained generally the same, specifics have varied over time. Adjustments to the salary minimum aim to account for earnings growth since 2019 and to restore the salary minimum’s screening function, ensuring that lower-paid employees are not being undercompensated for their work. The current increases take steps to raise the minimum salary level to the 35th percentile of weekly earnings, $1,128 per week, of full-time salaried workers in the lowest-wage census region.
The Department of Labor is also adjusting the earnings threshold for a separate streamlined exemption test applied to high wage earners, for whom high compensation serves as a strong indicator of exempt status. The new earnings threshold for highly compensated employees is set to the annualized weekly earnings of the 85th percentile of full-time salaried workers nationally. Starting July 1, 2024 the threshold rises to $132,964 per year, and the following January it will rise again to $151,164.
Historical Weekly Salary Levels for the EAP Exemption
Source: Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees, Table 1-Historical Weekly Salary Levels for the EAP Exemptions. Federal Register April 26, 2024. Available at: https://www.federalregister.gov/documents/2024/04/26/2024-08038/defining-and-delimiting-the-exemptions-for-executive-administrative-professional-outside-sales-and. Accessed July 31, 2024
Does This Affect My Employees?
To understand whether this change affects certain employees, consider the 3 historical requirements determining EAP exemption status. Does the practice employ people on fixed salaries? Are any of those salaries below the new thresholds? If they are paid above the threshold, then the standard duties test will determine if they are exempt. If they are paid below the threshold, then they are not exempt.
