HR One eNews

Compliance updates, analysis, plus HR and payroll best practices from HR One

Understanding New Federal Overtime Rules vs. New York State Standards

SALARY THRESHOLDS (1)

The U.S. Department of Labor (DOL) has announced pivotal changes to the federal salary thresholds for overtime exemptions under the Fair Labor Standards Act (FLSA), which are set to reshape compensation practices across the United States substantially. However, for business owners in New York, it's crucial to focus on the more stringent state regulations that surpass these federal adjustments for the executive and administrative exemptions.

Exempt vs. Non-Exempt Overview

In employment regulation, the distinction between exempt and non-exempt employees is crucial for determining eligibility for overtime pay.

  • Exempt Employees are typically salaried and fall under specific job categories such as executive, administrative, professional, and certain skilled computer-related roles. These employees must meet certain criteria related to their job duties and earn above a set salary threshold. Exempt employees are not eligible for overtime pay regardless of the hours worked beyond the standard 40-hour workweek.

Exemption

Executive Exemption

Administrative

Professional

Examples

Executives, managers, store managers, department heads, shift supervisor

Paralegals, healthcare administrators, marketing, public relations professionals, financial analysts.

Doctor, lawyer, nurse, accountant,scientist, engineer

The above are examples for illustrative purposes only and are not all-inclusive. Each individual position needs to be reviewed to see if it meets the requirements for an exemption.

  • Non-Exempt Employees do not meet these criteria and are usually paid on an hourly basis. They are entitled to overtime pay at a rate of one and a half times their regular hourly rate for hours worked beyond 40 in a workweek.

Understanding the criteria that distinguish these classifications helps employers comply with labor regulations and manage payroll effectively.

Federal Changes

To clearly understand the scope of the federal changes to overtime salary thresholds, please refer to the accompanying table below. This table outlines the incremental increases set to take effect over the coming years, highlighting the key dates and changes. Readers should note the discrepancy between the new federal standards and existing state standards.

2024

Exemption

New Federal Minimum Weekly Salary
Effective July 1, 2024

NYS Minimum Weekly Salary
Current

Executive

$684.00 to $844.00

($35,568 to $43,888 annually)

$1,200.00 (Downstate)/($62,400 annually)
$1,124.20 (Upstate)/($58,458.40 annually)

Administrative

$684.00 to $844.00

($35,568 to $43,888 annually)

$1,200.00 (Downstate)/($62,400 annually)
$1,124.20 (Upstate)/($58,458.40 annually)

Professional

$684.00 to $844.00

($35,568 to $43,888 annually)

 

Highly Compensated

$107,432 to $132,964

 

 2025

Exemption

Federal Minimum Weekly Salary

Effective January 1, 2025

NYS Minimum Weekly Salary

Effective January 1, 2025

Executive

 $1,128.00

($58,656 Annually)

$1,237.50 (Downstate)/($64,350 annually)
$1,161.65 (Upstate)/($60,405.80 annually)

Administrative

 $1,128.00

($58,656 Annually)

$1,237.50 (Downstate)/($64,350 annually)
$1,161.65 (Upstate)/($60,405.80 annually)

Professional

$1,128.00

($58,656 Annually)

 

Highly Compensated

$151,164

 

 

Existing New York State Standards

This means that while the federal increase is notable, it does not supersede New York’s more demanding thresholds for the executive and administrative exemptions. Employers must comply with the highest applicable standard, which in this case is dictated by the state. Understanding and adhering to these rules is essential to avoid costly compliance issues and to ensure fair compensation practices.

However, because New York does not have a separate threshold for the Professional exemption or the Highly Compensated Employee exemption, any employees classified as such will be impacted by the federal change.

Anticipated Legal Challenges

Additionally, employers should be aware that these federal rule changes are likely to face legal challenges, which may delay their implementation. Historical precedents show that significant shifts in labor regulations often lead to judicial reviews, which can alter the final outcome or impact the enforcement timeline. Businesses should stay informed through reliable resources and professional advisement to navigate these uncertainties effectively.

Conclusion

Hopefully, this change will not be as disruptive for employers in New York since, for the most part, they should already be in compliance with the new federal rules for the professional and administrative exemptions. Staying informed about both federal and state regulations is crucial. However, here are a few best practice compliance tips to make sure you’re following the rules:

  • Review Current Compensation Structures: Examine the salaries of all exempt employees to ensure they meet or exceed the new threshold requirements. Consider adjusting salaries or reclassifying employees as necessary.
  • Pay Close Attention to Any Professional /Highly Compensated Employee Exemptions: If there’s a part of the new rules that will have the largest impact on employers here in New York, it will be for those currently designated as exempt from overtime due to the professional or highly compensated employee exemptions.
  • Update Job Descriptions: Ensure that job descriptions accurately reflect the duties, responsibilities, and qualifications of each position. This is crucial for determining if an employee’s role truly meets the criteria for exemption under the FLSA.
  • Use Exemption Worksheets: HR One has developed worksheets that employers may use to help determine whether a particular employee is exempt or non-exempt, based on their job duties AND the salary threshold.

 SEND US A MESSAGE SPEECH BUBBLE

HR One E-News