Written by Christine Walters
Effective July 1, 2024, the rule for properly classifying an employee as exempt or non-exempt changed. This rule is commonly referred to as the overtime, blue-collar, or EAP rule. Before we recap the current rule, let’s review the basics.
To what does exempt status refer? A non-exempt employee must be paid at least minimum wage and 1.5 times the employee’s regular rate of pay for every hour worked over 40 in a work week. An exempt employee is exempt from or not entitled to minimum wage or overtime. To be properly classified as exempt, the employee must meet three tests.
Minimum Salary Test
On July 1, 2024, the minimum salary test was increased to $844/week. The minimum salary is scheduled to increase again effective January 1, 2025, to $1,128. If your employee does not earn a gross wage of at least the required minimum, the employee must be classified as non-exempt.
Salary Basis Test
A non-exempt employee may be paid on an hourly or salary basis. An exempt employee, however, must be paid on a salary basis. Generally, this means you make no deductions from the employee’s wage for quality or quantity. The employee is paid at least the same guaranteed minimum salary each workweek, regardless of hours worked with six limited exceptions.
Duties Test
The employee must meet at least one of three primary duties test or exemptions. At a high level, the executive exemption requires the employee to manage at least a part of the business and regularly supervise at least two full-time equivalents with the authority to hire/fire or give related recommendations that are given particular weight. The professional exemption requires the employee to regularly perform work requiring advanced knowledge in a field of science or learning and regularly exercise discretion and independent judgment. The administrative exemption requires the employee to perform work related to management or general business operations, regularly exercising discretion and independent judgment regarding matters of significance.
Maryland follows the federal rules. There are at least 20 states that have stricter rules. If you are a multi-state employer, ensure you are complying with the state rule, if any.
On The Horizon
Lawsuits are still pending challenging this rule. Stay in touch with your company’s legal counsel for updates. While the U.S. DOL updates its website, you can read more about these tests using Fact Sheet #17a and #17g.
