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A policy change could make millions eligible for overtime pay

On Behalf of | May 1, 2024 | Wage & Hour Laws |

Federal and state employment rules change to reflect shifts in the cost of living and evolving corporate practices. Many policies reflect changing socioeconomic factors, such as the cost of living in the United States. Federal wage laws, for example, look at what it costs to support a family and prevailing wages to ensure that workers receive fair pay for the work that they provide.

One of the important standards set by the federal government is the exemption threshold for salaried workers. Wage laws require that employers pay overtime wages when workers have more than 40 billable hours on the clock in a specific workweek. Workers who perform overtime should receive at least 150% of their standard hourly wages for the extra time worked.

Unfortunately, companies are often looking for ways to get around that obligation. Paying workers a low salary and then calling them exempt is one such strategy. Thankfully, the federal government just made it harder for businesses to abuse overtime exemptions.

The exemption threshold is about to increase twice

Inflation has had a significant impact on the average cost of living in the United States in recent years. Workers with relatively low salaries may now struggle to meet their basic household needs and may have to work numerous overtime hours each week without extra compensation. Many of those workers could soon see a boost in income thanks to an increase in the exemption threshold.

Beginning on July 1st, 2024, the minimum salary for an employee to be exempt from overtime wages increases to $43,888. Then, on January 1, 2025, the threshold increases to $58,656. This adjustment to the baseline salary required to bypass overtime pay requirements could potentially make millions of professionals eligible for overtime pay.

Companies may respond to this in one of two ways. They may increase the salary of employees so that it is over the threshold and they can continue requesting overtime without granting additional pay. Otherwise, they may reduce the number of hours that they schedule a worker with a low salary, thereby protecting them from burnout due to overwork combined with low wages.

Unfortunately, many companies may try to take advantage of workers by hiding this adjustment from them or trying to talk them into doing tasks off the clock. Employees need to know their wage and overtime rights if they hope to receive what they deserve. In some cases, pursuing litigation may be necessary when a company does not pay the overtime wages that employees have earned.