The Department of Labor has announced its final rule establishing new overtime rules that will increase the Fair Labor Standards Act’s minimum salary thresholds for Executive, Administrative, and Professional (EAP) and Highly Compensated Employees (HCE) overtime exemptions and will affect the rental housing industry.
This may require the reclassification of new and current employees or adjustments to salaries to satisfy the new threshold standards. Operators based in states like California or New York will not be impacted by this rule since labor laws in those states provide higher exemption thresholds and are not preempted by this rule.
Executive, Administrative, and Professional Exemption Threshold
Who Qualifies for EAP Exemption
The Federal Labor Standards Act requires that for the EAP Exemption to apply, as a general rule:
- The employee performs certain job duties;
- The employee must be paid on a pre-determined fixed salary not subject to reduction due to work quality or quantity; and
- The employee earns a salary above the current phase threshold for EAP employees, with some exceptions.
There was no change to the job duties standards, this Department of Labor Fact Sheet offers guidance on what duties qualify an employee for EAP Exemption.
Salary Threshold Increase Phase-In for EAP Exemption
The EAP Exemption salary threshold increases will take effect in three phases:
- Phase 1: Starts on July 1, 2024, with an increase of the EAP exemption threshold from $35,568 to $43,888.
- Phase 2: Starts on January 1, 2025, and raises the minimum annual salary threshold to $58,656.
- Phase 3: Starting July 1, 2027, the Department of Labor will automatically update the EAP Overtime Exemption salary threshold every three years.
Highly Compensated Employees (HCE) Exemption Threshold
Who Qualifies for HCE Exemption
The Federal Labor Standards Act requires that for the HCE Exemption to apply, as a general rule:
- The employee earns total annual compensation in excess of the current phase threshold established under the new rule with some exceptions.
- The employee’s primary duty includes performing office or non-manual work; and
- The employee customarily and regularly performs at least one of the exempt duties or responsibilities of an exempt executive, administrative, or professional employee.
Salary Threshold Increase Phase-In for HCE Exemption:
The HCE Exemption salary threshold increase will also take effect in three phases:
- Phase 1: Starts on July 1, 2024, with an increase of the HCE Exemption threshold from $107,432 to $132,964 per year.
- Phase 2: Starts on January 1, 2025, and raises the minimum annual salary threshold to $151,164 per year.
- Phase 3: Starting July 1, 2027, the Department of Labor will automatically update the HCE Exemption salary threshold every three years.
Next Steps
The National Apartment Association (NAA) has worked with the Partnership to Protect Workplace Opportunity to submit formal comments as well as working to elevate this issue with a letter to members of Congress, urging them to support legislation that would prevent the Department from implementing this rule.
NAA encourages potentially impacted housing providers, members and affiliates to contact legal counsel on this significant change in labor laws. We anticipate that there will be legal challenges from multiple industry sectors to this rule.
NAA will continue monitoring for developments and further advocacy opportunities to ensure the industry’s voice is heard.
To learn more about labor policy, please contact Joe Riter, NAA’s Senior Manager, Public Policy.