The U.S. Department of Labor's New Overtime Exemption Rule and What It Means for Clubs

The U.S. Department of Labor (DOL) finally released its new Overtime (OT) Exemption rule, and it greatly expands the number of employees entitled to OT pay — meaning it could wreak havoc on the way your club functions.

Specifically, this new rule changes the minimum weekly salary for exempt workers from $684 to $844 on July 1, 2024. While that change is not too bad, there’s more…. That minimum weekly salary then goes to $1,128 on January 1, 2025. Yes, you saw that right — a 65 percent increase over the current minimum weekly salary starting in about eight months.

Under this rule, an employee who meets the following three requirements will be exempt from OT pay:

1. They must be paid a predetermined, fixed salary — not wages set by the hour or day;

2. They must be paid $844/week on July 1, 2024 (then $1,128/week on January 1, 2025); and

3. They must meet all of the DOL’s executive or administrative duties test

Simply put, this new rule means those employees making less $43,888 a year on July 1 will be entitled to OT. Under the old rule, those making less than $35,586 a year were eligible for OT. Of course, the real issue arises on January 1 when employees making less than $58,656 a year will be entitled to OT. To avoid significant overtime costs, club leaders will either have to increase employees’ weekly pay to $844 (and then $1,128) or manage those workers’ time to ensure they don’t exceed 40 hrs. a week.

In addition, this new rule changes the salary level for workers under the highly compensated employee (HCE) exemption. The new rule bumps an HCE’s required pay from $107,432 a year to $132,964 a year on July 1. Then, on January 1, this wage shoots up to $151,164 a year. Yep, a 40+ percent jump over the current wage starting in January.

Under this rule, any HCE who meets the following four requirements will be exempt from OT pay:

1. They must perform office or non-manual work;

2. They must be paid at least $132,964 a year on July 1 (then $151,164 a year on January 1);

3. They must be paid at least $844 a week (July 1) and $1,128 a week (January 1); and

4. They must meet only one part of the DOL’s executive or administrative duties test.

As such, beginning July 1 employees making less than $132,964 will be entitled to OT unless they meet the requirements of a standard exempt employee. While this may not seem like a difficult task, please remember that the HCE exemption requires the employee to meet only one aspect of the executive or administrative duties test. A standard exempt employee must meet all aspects of the executive or administrative duties test. Once you get that all figured out, the yearly salary bumps up again to $151,164 on January 1.

Thankfully, club leaders have until July 1 to implement the first phase of this rule. As such, it’s imperative that you begin reviewing which of your employees are exempt and what changes you might need to make to keep them that way.

As always, I’m happy to help you or your team if there are questions. I’ll also be covering this topic in education sessions for club leaders across the country so reach out if I can help your HFTP Chapter as you adjust to this new regulation. Cheers!

Brad Steele, J.D. has 15+ years of experience in the private club industry and is founder of Private Club Consultants (PCC), which provides in-depth legal and operational answers for private clubs in America.