For the past two months, OIA has been sharing potential regulation updates from the Department of Labor (DOL), with a final decision anticipated for this spring. Last month, the Department of Labor released new overtime rules with some unforeseen updates and a fast-approaching timeline. One of the biggest impacts for agencies is that the minimum salary threshold for white-collar exemptions will increase on July 1, 2024, and again on January 1, 2025.   

Effective July 1, 2024, an executive, administrative, or professional employee must receive a salary of $43,888 per year to be classified as salaried and exempt from overtime. This will increase to $58,656 on January 1, 2025.  

Meanwhile, the annual compensation threshold for the highly compensated employee exemption will increase to $132,964 on July 1, 2024, and then again to $151,164 on January 1, 2025. 

These numbers are higher than what the DOL previewed in its August 2023 proposed rule. They represent a significant jump from the current $35,568 salary level for executive, administrative, and professional employees, and the $107,432 minimum compensation level for highly compensated employees. 

These Rules Were Released . . . Now What? 

Opponents of this rule change have expressed concerns about how in an already challenging hard market with workforce issues, this will add another layer to the problem. The new rule would put new constraints on agencies, reduce flexibility for any employee who may be reclassified, and may force already struggling agencies to make difficult choices that could limit both job creation and opportunities for employees.  

Business groups from a federal district court in Texas sued the U.S. Department of Labor over the new ruling on May 21. There will likely be a stay to delay ligation from moving forward ahead of July 1, but within a federal legal landscape such as this, it is hard to be certain.  

Regardless, agencies must begin the planning process just in case the rule becomes effective this summer. The team at OIA will continue to monitor the legal landscape and inform agencies if it’s implemented next month.

Immediate Steps Agencies Should Take 

1.  Review your current employee salaries and classifications. 
2. If you have employees being paid under the new threshold, you will need to decide whether to pay them at the new threshold or change their status from salaried/exempt to hourly/non-exempt. Factors to consider include how many OT hours an employee currently works and how much it may cost to pay them in overtime vs. increase their salary. How will the work get covered if employees are now able to only work 40 hours per week? 
3. Prepare to answer questions your staff may have about the new rule and timing of salary increases or changes in classification status. Questions to prepare for: 
   • When do you plan to implement changes? 
   • Will I be getting a raise? 
   • Does this mean I have been underpaid?  

Start Planning for Changes in Agency Operations 

Consider the following points as you begin to navigate what changes you may need within your agency: 

• With these new changes, if you will have hourly employees for the first time, you will need to pay them on a weekly or biweekly basis so their payroll is based on 40-hour work weeks. A bimonthly or monthly payroll process will make it difficult to properly account for overtime hours based on a 40-hour week. 
• Review budgeting for potential overtime. 
• Assess revisions for job descriptions as necessary. 
• Update payroll systems to properly track hours worked and overtime. 
• Provide training for employees and supervisors on time-tracking and compliance. 
• Set clear policy expectations that working overtime for hourly employees requires manager approval. 
• Do you have benefits plans or policies that are different based on employee status?  
• How will you manage perceptions and change for your employees about perceived status and autonomy? 

For more information about whether an employee should be classified as hourly or exempt, please reach out to Jeanie Giesler, Resource Center Advisor at jeanie@ohioinsuranceagents.com and she will provide you with the resources you need.

Please feel free to consult with Brian Lawrence, our Director of HR Solutions, at brian@ohioinsuranceagents.com for more detailed questions. 

If you have additional questions about the ruling, our advocacy efforts, or want additional information, please contact John Wells, OIA’s Government Affairs Manager at john@ohioinsuranceagents.com.