Earlier this year, the U.S. Department of Labor (DOL) released its latest guidance and rule on overtime pay. The specifics of this rule are contained in the Fair Labor Standards Act (FLSA).

The underlying premise of the FLSA is when most workers work more than 40 hours in a week, they get paid more. The primary intent of the latest version of the FLSA is to benefit lower-paid salaried workers.

Some workers are exempt from minimum wage and overtime protections, including executive, administrative and professional employees The so-called EAP exemption applies when: 

An employee is paid a salary.

The salary is not less than a minimum salary threshold.

An employee primarily performs executive, administrative or professional duties.

The DOL’s final rule went into effect in July. The rule will increase the standard salary level that helps define which salaried workers are entitled to overtime pay under the FLSA. This salary level was determined based on tens of thousands of comments from salaried workers across the country.

Starting July 1, most salaried workers who earn less than $844 per week became eligible for overtime pay. Starting Jan. 1, most salaried workers who make less than $1,128 per week will become eligible for overtime pay. Starting July 1, 2027, eligibility thresholds will be updated every three years based on wage data.

The rule changes probably don’t apply to EAP workers, so careful definition of job roles and responsibilities is in order. As these changes occur, job duties will continue to determine overtime exemption status for most salaried employees.

Some employers might tempted to reclassify certain employees to make them “independent contractors” to avoid overtime pay requirements.

They should proceed cautiously before taking that step. The DOL website offers guidance explaining the differences between employees and independent contractors, as does the IRS website.

The following, taken from DOL website, provides some guidance: A worker is entitled to minimum wage and overtime pay under the FLSA when there’s an employment relationship between the worker and employer and coverage under the FLSA. Employers are responsible for determining whether a worker is an employee under the FLSA. Misclassification occurs when an employer treats a worker who is an employee under the FLSA as an independent contractor.

The preceding is not to be construed as legal, tax or other guidance or advice. Always consult the appropriate licensed professionals..