The USDOL new OT Rule gives guidance on employees exempt from the FLSA minimum wage and overtime rules.

• Starting July 1, 2024, Employees with gross pay of $844.00 or more per week will be considered exempt.

• On January 1, 2025, that number rises to $1,128 per week.

• Sarting July 1, 2027, the OT cap will be adjusted every three years based on a specified methodology.

Overall, the Rule increases the Fair Labor Standards Act's annual salary-level threshold from $35,568 to $58,656. White-collar workers making less than that amount will now need to be paid overtime when they work more than 40 hours in a week. Exempt employees must meet both salary and a duty test.

For background, FLSA has a "white collar" exemption (the EAP stands for executive, administrative, or professional worker).  from the requirement to pay overtime of 1.5x regular rate of pay for more than 40 hours in a work week.  To meet the exemption, the USDOL has applied a salary basis test, a salary level test, and a duties test.  

The 2024 OT Rule is series of 13 amendments and additions to the existing OT Rule.  This 2024 Rule amended 29 CFR Part 541 as follows:

1. The authority citation for part 541 continues to read as follows:

Authority: 29 U.S.C. 213; Pub. L. 101-583, 104 Stat. 2871; Reorganization Plan No. 6 of
1950 (3 CFR, 1945-53 Comp., p. 1004); Secretary's Order 01-2014 (Dec. 19, 2014), 79 FR
77527 (Dec. 24, 2014).

2. Add § 541.5 to read as follows:

§ 541.5 Severability.
The provisions of this part are separate and severable and operate independently from one
another. If any provision of this part is held to be invalid or unenforceable by its terms, or as
applied to any person or circumstance, or stayed pending further agency action, the provision
must be construed so as to continue to give the maximum effect to the provision permitted by
law, unless such holding be one of utter invalidity or unenforceability, in which event the
provision will be severable from part 541 and will not affect the remainder thereof.

3. Amend § 541.100, by revising paragraph (a)(1) to read as follows:

§ 541.100 General rule for executive employees.
(a) * * *
(1) Compensated on a salary basis at not less than the level set forth in § 541.600;
* * *

4. Amend § 541.200, by revising paragraph (a)(1) to read as follows:

§ 541.200 General rule for administrative employees.
(a) * * *
(1) Compensated on a salary or fee basis at not less than the level set forth in § 541.600;
* * * * *

5. Amend § 541.204, by revising paragraph (a)(1) to read as follows:

§ 541.204 Educational establishments.
(a) * * *
(1) Compensated on a salary or fee basis at not less than the level set forth in § 541.600;
or on a salary basis which is at least equal to the entrance salary for teachers in the educational
establishment by which employed; and
* * *

6. Amend § 541.300, by revising paragraph (a)(1) to read as follows:

§ 541.300 General rule for professional employees.
(a) * * *
(1) Compensated on a salary or fee basis at not less than the level set forth in § 541.600;
and
* * * * *

7. Amend § 541.400, by revising the first sentence of paragraph (b) to read as follows:

§ 541.400 General rule for computer employees.
* * * * *
(b) The section 13(a)(1) exemption applies to any computer employee who is
compensated on a salary or fee basis at not less than the level set forth in § 541.600. *

8. Revise § 541.600 to read as follows:

§ 541.600 Amount of salary required.
(a) Standard salary level. To qualify as an exempt executive, administrative, or
professional employee under section 13(a)(1) of the Act, an employee must be compensated on a
salary basis at a rate per week of not less than the amount set forth in paragraphs (a)(1) through
(3) of this section, exclusive of board, lodging or other facilities, unless paragraph (b) or (c) of
this section applies. Administrative and professional employees may also be paid on a fee basis,
as defined in § 541.605.
(1) Beginning on July 1, 2024, $844 per week (the 20th percentile of weekly earnings of
full-time nonhourly workers in the lowest-wage Census Region and/or retail industry nationally).
(2) Beginning on January 1, 2025, $1,128 per week (the 35th percentile of weekly
earnings of full-time nonhourly workers in the lowest-wage Census Region).
(3) As of July 1, 2027, the level calculated pursuant to § 541.607(b)(1).

(b) Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico, U.S. Virgin
Islands. To qualify as an exempt executive, administrative, or professional employee under
section 13(a)(1) of the Act, an employee in the Commonwealth of the Northern Mariana Islands,
Guam, Puerto Rico, or the U.S. Virgin Islands employed by employers other than the Federal
Government must be compensated on a salary basis at a rate of not less than $455 per week,
exclusive of board, lodging or other facilities. Administrative and professional employees may
also be paid on a fee basis, as defined in § 541.605.

(c) American Samoa. To qualify as an exempt executive, administrative, or professional
employee under section 13(a)(1) of the Act, an employee in American Samoa employed by
employers other than the Federal Government must be compensated on a salary basis at a rate of
not less than $380 per week, exclusive of board, lodging or other facilities. Administrative and
professional employees may also be paid on a fee basis, as defined in § 541.605.
(d) Frequency of payment. The salary level requirement may be translated into equivalent
amounts for periods longer than one week. For example, the $1,128 per week requirement
described in paragraph (a)(2) of this section would be met if the employee is compensated
biweekly on a salary basis of not less than $2,256, semimonthly on a salary basis of not less than
$2,444, or monthly on a salary basis of not less than $4,888. However, the shortest period of
payment that will meet this compensation requirement is one week.
(e) Alternative salary level for academic administrative employees. In the case of
academic administrative employees, the salary level requirement also may be met by
compensation on a salary basis at a rate at least equal to the entrance salary for teachers in the
educational establishment by which the employee is employed, as provided in § 541.204(a)(1).
(f) Hourly rate for computer employees. In the case of computer employees, the
compensation requirement also may be met by compensation on an hourly basis at a rate not less
than $27.63 an hour, as provided in § 541.400(b).
(g) Exceptions to the standard salary criteria. In the case of professional employees, the
compensation requirements in this section shall not apply to employees engaged as teachers (see
§ 541.303); employees who hold a valid license or certificate permitting the practice of law or
medicine or any of their branches and are actually engaged in the practice thereof (see § 541.304);

or to employees who hold the requisite academic degree for the general practice of
medicine and are engaged in an internship or resident program pursuant to the practice of the
profession (see § 541.304). In the case of medical occupations, the exception from the salary or
fee requirement does not apply to pharmacists, nurses, therapists, technologists, sanitarians,
dietitians, social workers, psychologists, psychometrists, or other professions which service the
medical profession.

9. Amend § 541.601 by revising paragraph (a), the first sentence of paragraph (b)(1), and
paragraph (b)(2) to read as follows:

§ 541.601 Highly compensated employees.
(a) An employee shall be exempt under section 13(a)(1) of the Act if the employee
receives total annual compensation of not less than the amount set forth in paragraph (a)(1)
through (4) of this section, and the employee customarily and regularly performs any one or
more of the exempt duties or responsibilities of an executive, administrative, or professional
employee identified in subpart B, C, or D of this part:
(1) Beginning on July 1, 2024, $132,964 per year (the annualized earnings amount of the
80th percentile of full-time nonhourly workers nationally).
(2) Beginning on January 1, 2025, $151,164 per year (the annualized earnings amount of
the 85th percentile of full-time nonhourly workers nationally).
(3) As of July 1, 2027, the total annual compensation level calculated pursuant to
§ 541.607(b)(2).

(4) Where the annual period covers periods during which multiple total annual
compensation levels apply, the amount of total annual compensation due will be determined on a
proportional basis.
(b)(1) Total annual compensation must include at least a weekly amount equal to that
required by § 541.600(a)(1) through (3) paid on a salary or fee basis as set forth in §§ 541.602
and 541.605, except that § 541.602(a)(3) shall not apply to highly compensated employees. * * *
(2) If an employee's total annual compensation does not total at least the amount set forth
in paragraph (a) of this section by the last pay period of the 52-week period, the employer may,
during the last pay period or within one month after the end of the 52-week period, make one
final payment sufficient to achieve the required level. For example, for a 52-week period
beginning January 1, 2025, an employee may earn $135,000 in base salary, and the employer
may anticipate based upon past sales that the employee also will earn $20,000 in commissions.
However, due to poor sales in the final quarter of the year, the employee only earns $14,000 in
commissions. In this situation, the employer may within one month after the end of the year
make a payment of at least $2,164 to the employee. Any such final payment made after the end
of the 52-week period may count only toward the prior year's total annual compensation and not
toward the total annual compensation in the year it was paid. If the employer fails to make such a
payment, the employee does not qualify as a highly compensated employee, but may still qualify
as exempt under subpart B, C, or D of this part.

10. Amend § 541.602 by revising the first sentence of paragraph (a)(3) and the first
sentence of paragraph (a)(3)(i) to read as follows:

§ 541.602 Salary basis.
* * * * *
(a)(3) Up to ten percent of the salary amount required by § 541.600(a) through (c) may be
satisfied by the payment of nondiscretionary bonuses, incentives, and commissions, that are paid
annually or more frequently. * * *
(i) If by the last pay period of the 52-week period the sum of the employee's weekly
salary plus nondiscretionary bonus, incentive, and commission payments received is less than 52
times the weekly salary amount required by § 541.600(a) through (c), the employer may make
one final payment sufficient to achieve the required level no later than the next pay period after
the end of the year. * * *
* * *

11. Amend § 541.604 by

a. Revising the second, third, and fourth sentences of paragraph (a) and;
b. Revising the third sentence in paragraph (b).
The revisions and additions read as follows:
§ 541.604 Minimum guarantee plus extras.
(a) * * * Thus, for example under the salary requirement described in § 541.600(a)(2), an
exempt employee guaranteed at least $1,128 each week paid on a salary basis may also receive
additional compensation of a one percent commission on sales. An exempt employee also may
receive a percentage of the sales or profits of the employer if the employment arrangement also
includes a guarantee of at least $1,128 each week paid on a salary basis. Similarly, the exemption
is not lost if an exempt employee who is guaranteed at least $1,128 each week paid on a salary

basis also receives additional compensation based on hours worked for work beyond the normal
workweek. * * *
(b) * * * Thus, for example under the salary requirement described in § 541.600(a)(2), an
exempt employee guaranteed compensation of at least $1,210 for any week in which the
employee performs any work, and who normally works four or five shifts each week, may be
paid $350 per shift without violating the $1,128 per week salary basis requirement. * * *

12. Amend § 541.605 by revising paragraph (b) to read as follows:

§ 541.605 Fee basis.
* * * * *
(b) To determine whether the fee payment meets the minimum amount of salary required
for exemption under these regulations, the amount paid to the employee will be tested by
determining the time worked on the job and whether the fee payment is at a rate that would
amount to at least the minimum salary per week, as required by §§ 541.600(a) through (c) and
541.602(a), if the employee worked 40 hours. Thus, for example under the salary requirement
described in § 541.600(a)(2), an artist paid $600 for a picture that took 20 hours to complete
meets the $1,128 minimum salary requirement for exemption since earnings at this rate would
yield the artist $1,200 if 40 hours were worked.

13. Add § 541.607 to read as follows:

§ 541.607 Regular updates to amounts of salary and compensation required.
(a) Initial update—(1) Standard salary level. Beginning on July 1, 2024, the amount
required to be paid per week to an exempt employee on a salary or fee basis, as applicable,
pursuant to § 541.600(a)(1) will be not less than $844.

(2) Highly compensated employees. Beginning on July 1, 2024, the amount required to be
paid in total annual compensation to an exempt highly compensated employee pursuant to §
541.601(a)(1) will be not less than $132,964.
(b) Future updates—(1) Standard salary level. (i) As of July 1, 2027, and every 3 years
thereafter, the amount required to be paid to an exempt employee on a salary or fee basis, as
applicable, pursuant to § 541.600(a) will be updated to reflect current earnings data.
(ii) The Secretary will determine the future update amounts by applying the methodology
in effect under § 541.600(a) at the time the Secretary issues the notice required by paragraph
(b)(3) of this section to current earnings data.
(2) Highly compensated employees. (i) As of July 1, 2027, and every 3 years thereafter,
the amount required to be paid in total annual compensation to an exempt highly compensated
employee pursuant to § 541.601(a) will be updated to reflect current earnings data.
(ii) The Secretary will determine the future update amounts by applying the methodology
used to determine the total annual compensation amount in effect under § 541.601(a) at the time
the Secretary issues the notice required by paragraph (b)(3) of this section to current earnings
data.
(3) Notice. (i) Not fewer than 150 days before each future update of the earnings
requirements under paragraphs (b)(1) and (2) of this section, the Secretary will publish a notice
in the Federal Register stating the updated amounts based on the most recent available 4 quarters
of CPS MORG data, or its successor publication, as published by the Bureau of Labor Statistics.

(ii) No later than the effective date of the updated earnings requirements, the Wage and
Hour Division will publish on its website the updated amounts for employees paid pursuant to
this part.
(4) Delay of updates. A future update to the earnings thresholds under this section is
delayed from taking effect for a period of 120 days if the Secretary has separately published a
notice of proposed rulemaking in the Federal Register, not fewer than 150 days before the date
the update is set to take effect, proposing changes to the earnings threshold(s) and/or updating
mechanism due to unforeseen economic or other conditions. The Secretary must state in the
notice issued pursuant to paragraph (b)(3)(i) of this section that the scheduled update is delayed
in accordance with this paragraph (b)(4). If the Secretary does not issue a final rule affecting the
scheduled update to the earnings thresholds by the end of the 120-day extension period, the
updated amounts published in accordance with paragraph (b)(3) of this section will take effect
upon the expiration of the 120-day period. The 120-day delay of a scheduled update under this
paragraph will not change the effective dates for future updates of the earnings requirements
under this section.
Signed this 11th day of April, 2024.