Understanding federal overtime law in 2024 is essential for both employers and employees across the United States. As workplace standards evolve, the U.S. Department of Labor (DOL) continues to adjust regulations to ensure fair compensation. The rules regarding who qualifies for overtime, how it is calculated, and what exceptions apply have a significant impact on working hours and take-home pay. This topic provides a comprehensive overview of federal overtime law as of 2024, including new updates, exemptions, employer responsibilities, and employee rights.
What Is Federal Overtime Law?
Federal overtime law is primarily governed by the Fair Labor Standards Act (FLSA), which mandates that non-exempt employees receive overtime pay for any hours worked over 40 in a workweek. The standard overtime rate is 1.5 times the employee’s regular hourly wage. This law aims to protect employees from being overworked without fair compensation.
FLSA Coverage and Scope
The FLSA applies to most businesses, particularly those engaged in interstate commerce or with annual sales of at least $500,000. It covers full-time and part-time workers, but certain types of employees may be exempt based on their job duties and salary level. Understanding whether an employee is exempt or non-exempt is crucial in determining overtime eligibility.
Key Changes to Overtime Law in 2024
In 2024, significant amendments were made to the federal overtime law, particularly regarding salary thresholds for exempt employees. These updates aim to extend overtime protections to more workers by raising the earnings ceiling required for exemption under the FLSA.
Updated Salary Threshold
As of July 1, 2024, the minimum salary required for an employee to qualify as exempt under the ‘white-collar’ exemptions (executive, administrative, and professional roles) increased from $684 per week to $844 per week (equivalent to $43,888 annually). A second increase is scheduled for January 1, 2025, when the threshold will rise again to $1,128 per week ($58,656 annually).
Highly Compensated Employee Threshold
The threshold for highly compensated employees (HCE) also increased. As of July 1, 2024, the minimum total annual compensation required for the HCE exemption rose to $132,964. This threshold will further increase to $151,164 by 2025.
Overtime Calculation Under the Law
Overtime must be paid at one and a half times the employee’s regular rate of pay. The regular rate includes not just the hourly wage, but also non-discretionary bonuses, commissions, and incentive payments. Employers must be careful when calculating the regular rate to ensure full compliance with the law.
Example of Overtime Pay
If an employee earns $20 per hour and works 50 hours in a workweek, they are entitled to 10 hours of overtime. The overtime pay would be $20 x 1.5 = $30 per hour. So, 10 hours x $30 = $300 in overtime pay.
Exempt vs. Non-Exempt Employees
Determining whether an employee is exempt from overtime is based on three key criteria: salary level, salary basis, and job duties.
- Salary Level Test: The employee must earn at least the updated minimum weekly salary.
- Salary Basis Test: The employee must be paid a fixed salary that does not fluctuate based on the number of hours worked.
- Duties Test: The employee must perform specific types of work, such as managing other employees or exercising independent judgment.
Failing to meet any of these criteria means the employee is non-exempt and entitled to overtime pay.
Recordkeeping Requirements
Federal overtime law in 2024 continues to require employers to maintain accurate records of employees’ hours and wages. These records must include daily start and end times, total hours worked, and total earnings. Keeping proper records is vital for defending against claims of unpaid overtime.
Penalties for Non-Compliance
Employers who violate overtime laws may face serious consequences. These include paying back wages, double damages (liquidated damages), and civil penalties. In some cases, legal action may be brought by the DOL or by individual employees.
Common Employer Mistakes
- Misclassifying employees as exempt
- Failing to account for bonuses in the regular rate
- Not paying for off-the-clock work
- Inadequate time-tracking systems
Employee Rights and Legal Remedies
Employees who believe they have been denied proper overtime pay can file a complaint with the U.S. Department of Labor’s Wage and Hour Division. They may also pursue legal action through the courts. The statute of limitations for filing a claim is generally two years, extended to three years for willful violations.
Impact on Employers and Workforce
The 2024 updates to federal overtime law will affect millions of workers and thousands of businesses. Employers must review job classifications and compensation practices to ensure compliance. Many may choose to raise salaries above the threshold to maintain exempt status or reclassify roles as non-exempt and track hours accordingly.
Preparing for Compliance
- Conduct a compensation audit
- Train managers on proper timekeeping
- Update payroll systems
- Communicate changes transparently with employees
These proactive steps can prevent costly litigation and foster a fair and legally compliant work environment.
Federal overtime law in 2024 reflects a shift toward greater employee protections through increased salary thresholds and stricter compliance standards. Employers must stay informed of these changes and adjust practices accordingly to avoid legal risks. For employees, understanding their rights under the law ensures they are fairly compensated for all hours worked. As the labor landscape continues to evolve, knowledge and compliance with overtime regulations remain essential for a healthy and lawful workplace.