Tax Byte
DOL Updates Exemptions For Executive, Administrative, Professional, Outside Sales, And Computer Employees
The Department of Labor final rule Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees took effect on July 1, 2024. The final rule updated and revised the regulations issued under §13(a)(1) of the Fair Labor Standards Act implementing the exemption from minimum wage and overtime pay requirements for executive, administrative, and professional (EAP) employees. Revisions include increases to the standard salary level and the highly compensated employee total annual compensation threshold, as well as a mechanism that provides for the timely and efficient updating of these earnings thresholds to reflect current earnings data.
Specific exemptions to overtime pay for certain categories of employees:
Executive Exemption: Employees whose primary duty is managing the enterprise or a recognized department/subdivision, and who regularly direct the work of at least two or more other full-time employees or their equivalent, are exempt. They must also have the authority to hire or fire other employees or their suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.
Administrative Exemption: Employees performing office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers, and who exercise discretion and independent judgment with respect to matters of significance, are exempt.
Professional Exemption: This includes employees whose primary duty is the performance of work requiring advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction; or work that is original and creative in a recognized field of artistic endeavor.
Computer Employee Exemption: Employees engaged in computer systems analysis, programming, software engineering, or other similarly skilled computer-related occupations are exempt, provided their hourly rate is at least $55.58 (2024) or they meet the salary basis test.
Outside Sales Exemption: Employees who make sales or obtain orders/contracts for services or the use of facilities, and who are customarily and regularly engaged away from the employer’s place of business in performing such duties, are exempt.
Highly Compensated Employees: Employees who perform office or non-manual work and are paid in 2024 total annual compensation of $134,964 or more (which includes at least $844 per week (July 1, 2024) paid on a salary or fee basis) are exempt from overtime pay if they customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee.
Tax Practitioner Planning:
This change means that most salaried workers earning less than $844 per week in 2024 ($1,128 in 2025) will become eligible for overtime pay.