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6 days ago

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New Overtime Pay Rules: Here’s What You Need To Know

Key Highlights

What Business Owners Need To Know About The New Overtime Rules

The Department of Labor has officially changed overtime rules for employers starting on July 1, 2024. Here’s what you need to know:

Prior to July 1, 2024, you didn’t have to pay employees for overtime if they made more than $35,568 a year. After July 1, 2024, the new rule increases that salary threshold to $43,888. Now, any employees who make $43,888 or less a year will qualify for overtime pay. They must also meet other requirements like being a salaried employee and they’re not supervising anyone.
This number will significantly increase again starting on January 1, 2025. On that day, the salary amount goes up to $58,656. This means that if you have any salary employees who aren’t supervising anyone, their job duties fit the necessary description, and they make less than $58,656 a year, you are going to owe them overtime.
In Texas, a federal court has challenged and suspended this ruling. If you’re a business owner in Texas, it’s recommended that you speak with a labor attorney to make sure your employees are classified the correct way.
Some companies are starting to enact strict overtime rules, while others are adjusting their employee’s status from a salaried worker to hourly worker.
Be sure to comply to these new rules because if you’re not in compliance, your employees could sue your business for wage theft.

Transcript

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Gene (00:02):

Hey everybody, it’s Gene Marks and welcome to another episode of the Hartford’s Small Biz Ahead Podcast. Thank you so much for joining today. This week I want to talk to you about overtime pay, because new rules just went into effect on July 1st of this year that are going to impact your business, meaning you may have to pay your employees more in overtime. Now, prior to July 1st, if you were paying anybody more than $35,568 a year, you didn’t have to pay them overtime. They could work 80 hours a week and you wouldn’t owe them overtime. Well, those rules have changed. That number has now gone up to $43,888. So approximately $44,000 as of July 1st, which means if you are paying anybody annually, about $44,000 a year or less, and they work overtime and they meet other requirements, say for example, there are salaried employees, they are not supervising anybody. They have certain job titles and job descriptions.

Gene (01:12):

I won’t go into those details on this segment because they’re a little too detailed, but I’ll tell you how to get some answers soon. But anyway, if you have employees that are generally salaried and not supervising anybody, and they’re making less than $43,888 a year, and they work more than 40 hours in a week, you’re going to have to pay them overtime. And here’s something else you need to be aware of. That number goes up even more starting January 1st, 2025. On that day, the number goes up to $58,656, which means that if you have any employees in your company who are salaried and they’re not supervising anybody and they meet other requirements about their titles and job descriptions, and they are making less than $58,656 a year, you are going to owe them overtime. That is more than $20,000 above what the rule is right now.

Gene (02:15):

So, a lot of employees, it’s estimated almost 4 million employees around the country are going to fall into this category, which basically means you are going to owe them overtime pay, and you need to make sure that you are taking some steps about this. So let me give you some advice about all of this. First of all, you may have heard that this rule, which was issued by the Department of Labor, is being contested. In fact, there was a lawsuit in Texas where a judge suspended this rule for various reasons, including whether or not the Department of Labor overstepped its responsibilities, whether or not it’s constitutional or not. And it affects Texas employees only.

Gene (02:59):

So if you’re a business owner in Texas, you’re going to need to talk to a labor attorney about what to do, but it doesn’t affect the rest of the country. In addition, you may have heard that there was a new Supreme Court ruling just this past week called the Chevron Doctrine. In fact, it overturned the Chevron Doctrine. And what that means basically, is that now whenever departments like the Department of Labor issue regulations, when you people can take them to court and have judges decide whether or not they have they have overstepped their bounds or they’ve interpreted the law correctly. So those kinds of things, lawsuits could very well put a stop to this overtime rule and could very well suspend it going forward. And also, let me warn you that depending on how the elections turn out in November, if a new administration comes into power, that administration may also overturn or reverse this overtime rule.

Gene (03:51):

So there’s definitely a lot of uncertainty out there. And the question is, what do you do? How do you run your business based on this? Well, here’s my advice to you, and this is advice I’ve gotten after speaking with a, a handful of labor attorneys. You want to move forward as planned. You have to assume that this rule is in effect and going to be in effect for the foreseeable future. And you have to make sure that you’re taking the right steps. So that means that you want to talk to a labor attorney or an HR specialist. You want to go through your entire payroll, all of your people, and you want to make sure that they are classified correctly between those that are exempt from the rule and those that are not exempt from the rule. And again, like I said earlier, you’re going to have to look at what their salary is to see if they’re under or over those limits.

Gene (04:38):

You’re going to have to look at what their job titles are. You’re going to have to look at what their job responsibilities and duties are. And there are certain parts of this rule that does exempt some employees from getting overtime. You’re going to have to make sure that you understand what those exemptions are, and if any of those employees qualify you want to do that now and you want to do it with a labor attorney or an HR specialist. And frankly, you probably want to do that about twice a year, every six months to make sure that everybody is classified the right way the right way. Now you think to yourself like, okay, so what do we do? We now have a bunch of new employees that are under this close to $59,000 wage that’s going to be in effect in January.

Gene (05:22):

What do we do about overtime? Well, some of my clients are, are writing strict policies against overtime. In other words, saying to employees, no overtime is allowed unless you get it approved in advance with your supervisor. Other companies are changing some salaried employees to hourly employees so that you just pay ’em by the hour and you determine what your wage rates are going to be. Then some clients of mine are actually doing, taking other steps with their overtime workers, like maybe bumping up salaries just to get ’em, a little bit above that salary wage limit if it’s only an

Gene (05:56):

Extra couple thousand bucks so that they’re, they don’t have to worry about overtime pay going forward. But you need to evaluate all your employees. You need to do this with a labor attorney. You need to make sure everybody’s classified correctly and then you need to come up with what that strategy is going to be. Do not ignore this guys. Don’t sit around waiting for a lawsuit to suspend all of this or for the presidential election. Don’t do that. Move forward as if this is real because it is real. And if you are in violation of this rule, let me tell you, the Department of Labor is probably not going to come and audit you but your employees, well, they get the internet too. They could very well report you to the Department of Labor if they feel that they are not getting overtime pay that they’re entitled to.

Gene (06:43):

And what are they going to call that? They’re going to call that wage theft. You are not going to want to be on the wrong side of a wage theft lawsuit. You don’t want to read the name of your company in the local news saying that you’ve been sued for wage theft. It’s not exactly a great recruiting tool. So, you want to make sure that you’re in compliance, because if you’re not, it’s very easy to get found out. If you’re not in compliance, you are subject to penalties and as well bad pr. So, bear in mind that you want to make sure that you’re following those, those rules. So here’s the takeaway that you need to know. Overtime rules have officially changed on July 1st. The amount of pay as of July 1st has gone up, which means if you have any employees now that are making less than $43,888 a year, and they’re salaried and they have certain job titles and responsibilities, you may very well have to be paying them overtime for any hours. They work over 40 hours in a week.

Gene (07:41):

Beginning January 1st, 2025. That number goes up to $58,656 a year. Which means if you have any employees making under that amount and they have a certain job title and certain responsibilities and they’re salaried, you may have to pay them overtime again for any hours over 40 a week. Talk to a labor attorney now. Do not ignore this. Make sure that you’re in compliance with this rule. Otherwise, you can not only get into bad financial trouble, but it could be getting some PR for your company that you just don’t want to be getting. That’s my advice to you on this overtime rule. I’ll keep you posted if things changes or if anything happens in the courts that might suspend this around the country, but right now it’s going forward. Business as usual. Hey, everybody. You’ve been listening to the Small Biz Ahead Podcast. My name is Gene Marks. If you need any advice or tips or help in running your business, please visit us at smallbizahead.com or sba.hartford.com. Thank you so much for listening. We’ll be back with you next week with another piece of advice for helping you run your business. We will see you then. Take care.

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