New Overtime Rule and How It Applies to Your Workplace
Earlier this year, the U.S. Department of Labor (DOL) issued a final rule representing the most substantial increase in the federal overtime salary threshold in decades. Under the final rule, millions of Americans recently became eligible for overtime pay, and an additional pool of salaried workers will become eligible for overtime pay next year.
The California Center for Nonprofit Law is here to advise you on all legal requirements that impact your public charity, including how federal employment laws impact your workplace. Call our office when you have questions about these important issues to keep your public charity running smoothly and compliant with all federal, state, and local laws.
Changes to the Salary Thresholds for Overtime Pay
As of July 1, 2024, salaried workers earning less than $43,888 per year became eligible 1.5 times their regular pay rate if they work more than 40 hours per week, up from the previous salary threshold of $35,5681. Furthermore, as of January 1, 2025, the salary threshold will increase to $58,656.
The final rule also increased the minimum salary threshold for highly compensated employees, another group of exempt employees. The salary threshold increased from $107,432 annually to $132,964 on July 1, 2024. It will further increase to
$151,164 on January 1, 2025. Starting July 1, 2027, these salary thresholds will automatically update every three years.
Most hourly workers are already entitled to overtime pay. However, according to the Economic Policy Institute, the increase in the salary threshold will boost the pay of as many as 4.3 million lower-income salaried workers. All businesses, including charitable organizations, must be careful to properly classify their employees and comply with the new overtime rule.
Exemptions from the Overtime Rule
The Fair Labor Standards Act (FLSA) provides that “white-collar” salaried workers earning more than the salary threshold set by the DOL in executive, administrative, professional, outside sales, and certain computer roles, including some supervisors, are exempt from the overtime rule. However, manual laborers and other “blue-collar” workers who perform repetitive operations with their hands, physical skills, and energy are not exempt from the overtime provisions of FLSA. Likewise, non-management employees covered by FLSA in production, maintenance, construction, and similar occupations are not exempt from FLSA.
The exemption for “white-collar” workers also does not apply to police officers, firefighters, emergency medical technicians, paramedics, rescue workers, and other first responders. The final rule contains no exemption for employees of nonprofit or charitable organizations.
Consequences for Misclassification of Exempt Employees
The FLSA imposes significant financial consequences for employers who misclassify exempt employees. Misclassification of an employee as exempt can result in employers being liable for all unpaid overtime owed to an employee for as long as three years before the employee’s claim. Courts also can order the employer to pay liquidated damages equal to the amount of the unpaid overtime. Employers who willfully or repeatedly misclassify employees as exempt also can face civil penalties of up to $1,000 per violation and be subject to criminal prosecution. States and localities also may have wage and hour laws that impose separate penalties for similar violations.
Contact Us Today for Legal Assistance
The California Center for Nonprofit Law focuses its practice on legal matters that affect charities and other nonprofit organizations in California. This unique focus allows us to concentrate on keeping abreast of the ever-changing laws and policies as they develop over time. We are here to represent the interests of your nonprofit organization throughout every stage of your legal matter. Call us at (949) 892-1221, email us at info@npolawyers.com, or fill out our contact form online and schedule a consultation about your nonprofit organization today.