By Stephanie Thompson

UPDATE: The overtime rule, ultimately didn’t pass and the old rules are in place as of January 2025.

While I’m not an expert on legal situations, I felt it was my duty to pass along information that I do know about this new law.  Many years ago, a similar law was going to be passed and created quite a stir, so my co-worker at the time and myself invested a lot of time on the subject and even spoke to an employer attorney for extra help.  The law ultimately did not go through all those years ago, but I think we all knew it was going to come back around at some point.  

My disclaimer is that this information can be used to help bring awareness, but I suggest doing your own research and talking to your legal counsel (which could be expensive).  I’m going to lay things out the best I can and include resources for you to do your own research.

On April 26, 2024 the Department of Labor (DOL) announced an increase to the minimum salary for exempt employees.  Exempt employees are those who are not eligible to receive overtime.  To be an exempt employee, they need to pass 3 tests: (1) be a bona fide executive, administrative or professional (EAP) (2) the job duties test (3) the salary threshold.  I’ll explain each to the best of my abilities:

Bona fide EAP (Executive, Administrative, or Professional)

According to the DOL, for an employee to fall within the EAP exemption, an employee generally must:

• Be paid a salary, meaning that they are paid a predetermined and fixed amount that is not subject to reduction because of variations in the quality or quantity of work performed during the work week
• Be paid at least a specified weekly salary level (salary thresholds – see below)
• Primarily perform executive, administrative, or professional duties (duties test – see below)

*It’s important to note that the duties test should not be thought of based on an employee’s job title, their actual job duties are what the DOL would look at in the case of an audit.  Their job description would be a great back up, so make sure you have one in place for all roles.

*For more information about this click here

Duties Test

In most childcare centers, Directors and Assistant Directors would fall under either the Executive or Administrative exemption.  It is important to look at each employee who currently receives a salary to determine if one of these classifications apply to them.  If one does, you’ll next need to make sure they meet the salary threshold.

*Please refer to this link for details.  

Salary Thresholds 

Current minimum salary: $684/week or $35,568 per year 

Effective July 1, 2024 the minimum salary: $844/week or $43,888/yr 

Effective January 1, 2025 the min. salary: $1,128/week or $58,656/yr 

Next increase: Every 3 years the minimum salary will also increase, the next one being January 1, 2027.

*These salary thresholds don’t have to be paid out weekly and can include usage of PTO.  Additionally, 10% of an employee’s non-discretionary bonus can count towards these salary totals.

**Exceptions to this rule include teachers, however it’s extremely important to understand who the Dept of Labor considers a teacher.  While we all disagree, the consensus in the legal world is that preschool teachers are generally NOT considered teachers for this purpose.  

Since the announcement

The DOL is being sued because of this rule.  Towards the end of June, there are trials and I hear a judgment will be made as to the future of this ruling.  I have read many articles and watched webinars recently and the advice is to assume the ruling WILL be in effect July 1st.  To not take this seriously, would be a miss.  So even though this law might end up being delayed, it’s too risky to assume such a thing right now.

Next steps

Take a deep breath….this is a lot to take in.  I’m going to break down your next steps in a simple format:

#1 – Use this format to analyze your current salaried employees:

#2 If you determine an employee’s job duties do not qualify them for an EAP exemption, you have a few options.

• They can become an hourly employee and are eligible for overtime or
• They can remain a salaried employee and also be eligible for overtime.  In this situation, their time must be tracked in order to know when overtime must be paid out.  This would be a shift in practices and habits, but a very important piece to it.

#3 If you determine that a salaried employee does not meet the salary threshold, determine how much of an increase would need to go into effect by July 1st to be compliant.  If an employee needs a few thousand dollar annual raise to keep them as salary exempt employees, I would suggest making that change.  If the financial burden is too large, I would decide which of the bullet points you’d like to use in #2.

Once you’ve completed this exercise for the July 1st increase, repeat the exact same process for the January 1st increase.  

#4 Talk to your affected employees.  This can be a challenge if you financially cannot meet the salary threshold.  Some employees might feel that becoming an hourly employee might feel like a demotion.  In a way, this change would benefit them, as they would get paid for their actual hours worked (you’ll want to talk to them about how many hours they can work each week, as paying overtime can lead to increased costs).  How many hours on average is this person working?  If it’s between paying this person overtime or having to hire another employee to cover their hours past 40, it might cost you even more money to go that route.

If the solution is to keep them salaried and pay overtime, their habits will need to be switched to a time tracking one, similar to what is done for teachers.

Areas of caution

This blog does not constitute legal advice, as I am not an attorney. Speak with your attorney if you have questions! Additionally it’s important to note that I’m only talking about federal law changes, check into your own state laws on salary requirements and overtime requirements.

If you are a director reading this and have not heard from leadership about this topic, please pass this information along to them!  I would not assume everyone is up to date on the laws unless you have a dedicated HR person!

You can find more details about the ruling on the DOL’s website here

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