Overtime Rule: Raise Salaries or Reclassify Employees?

Labor and employment attorney Timothy Taylor was quoted in a Society for Human Resource Management (SHRM) article exploring how employers should respond to the U.S. Department of Labor's (DOL) new overtime rule. The rule raises the standard salary threshold for overtime in two phases, one beginning July 1, 2024, and another beginning Jan. 1, 2025, after which there will be automatic increases every three years. Professionals interviewed by SHRM for the article noted that companies deciding whether to reclassify workers should consider both economic and moral consequences of these moves. For example, reclassifying an exempt employee who rarely works overtime as nonexempt may make sense financially but could also be viewed as a demotion. Mr. Taylor advised employers to prepare for the first salary threshold increase but wait on the second, as it will likely be caught in litigation before taking effect, if at all.

"[The July 1] increase simply adjusts for inflation," he explained. "That second increase is legally aggressive, and its fate in court is uncertain."

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