FAQs About the Overtime Rule Answered

With more than 60,000 HR-related inquiries handled each year by SHRM’s HR Knowledge Center, Amber Clayton, SHRM-SCP, senior director of Knowledge Center Operations, and her team have answered many questions about the new overtime rule. Clayton shared some of those at a June 25 SHRM Annual Conference & Expo 2024 (SHRM24) session.

Clayton explained that the standard salary threshold for the overtime rule has a minimum weekly amount, which the new rule has raised. This amount currently is $684 per week. It is set to rise to $844 on July 1 and $1,128 on Jan. 1, 2025, then increase again by an as-yet-to-be-determined amount July 1, 2027, and every three years after, Clayton noted. Employees also must satisfy a duties test and be paid on a salary basis, in addition to being paid the standard salary threshold, to be eligible for an executive, administrative, or professional exemption to the overtime rule—commonly referred to as the “white-collar” exemptions. 

Can some employees be nonexempt and others be exempt in the same position?
Yes, but be sure there is a job-related reason for the difference to avoid discrimination claims, Clayton said.

Can nondiscretionary bonuses satisfy the minimum salary requirement?

It depends. Nondiscretionary bonuses can satisfy up to 10% of the minimum salary requirement for the standard salary threshold used for the white-collar exemptions.

However, Clayton cautioned, for the highly compensated employee exemption, employers can’t use nondiscretionary bonuses to satisfy the weekly salary threshold, but they can for the annual salary threshold.

The highly compensated employee exemption has a weekly salary and annual salary amount, she said. It also has a duties test that is more relaxed than for the standard salary threshold. Currently, to be eligible for this exemption, an employee must earn a total annual compensation of $107,432 or more, which includes at least $684 per week paid on a salary or fee basis. That amount increases to at least $132,964 per year, which includes at least $844 per week on a salary basis, as of July 1, 2024, and then at least $151,164 per year, which includes at least $1,128 per week on a salary basis, effective Jan. 1, 2025.

Can an employee be paid a salary and be nonexempt?

Yes, Clayton noted.

Do changes to the overtime rule affect smaller employers?
Yes, Clayton said.

There are two ways in which an employee can be covered by the law: “enterprise coverage” and “individual coverage,” according to the U.S. Department of Labor (DOL).

Employees who work for certain businesses or organizations—or “enterprises”—are covered by the Fair Labor Standards Act (FLSA). These enterprises, which must have at least two employees, are 1) those that have an annual dollar volume of sales or business done of at least $500,000, and 2) hospitals; businesses providing medical or nursing care for residents; schools and preschools; and government agencies.

Even when there is no enterprise coverage, employees are protected by the FLSA if their work regularly involves them in interstate commerce. Examples of employees who are involved in interstate commerce include those who:

• Produce goods—such as a worker assembling components in a factory or a secretary typing letters in an office—that will be sent out of state.
• Regularly make phone calls to people located in other states.
• Handle records of interstate transactions.
• Travel to other states while performing their jobs.
• Do janitorial work in buildings where goods are produced for shipment outside the state.

Also, domestic service workers—such as housekeepers, full-time babysitters, and cooks—are normally covered by the law, according to the DOL.

Is there an exclusion from the overtime rule for nonprofits?
No, Clayton said.

Practices to Review

If HR professionals are making changes to comply with the rule, despite legal challenges to it, they should look at the amount of overtime that employees work and determine how much overtime they want an employee reclassified as nonexempt to work going forward. Most employers will probably want to limit overtime, she noted.

“Review your budget too,” Clayton recommended. She said that because budgets may have been set already, it might be challenging to reallocate money.

Review job descriptions and policies as well, she said.

By looking at overtime hours, budgets, and job descriptions, HR should have a better idea whether it wants to keep an employee exempt by raising their salary to meet the new salary thresholds or reclassify them as nonexempt to make them eligible for overtime pay, Clayton said.

It’s imperative as well that HR have a communication plan, she said: “Be able to explain why things are changing.”