Department of Labor's New Wage and Hour Regulations

The Department of Labor's Wage and Hour Division regularly updates regulations that govern minimum wage, overtime, and employee classification—and recent years have seen particularly significant changes that HR and payroll professionals must track carefully. The 2024 DOL final rule raised the salary threshold for the Fair Labor Standards Act's (FLSA) white-collar exemptions (executive, administrative, and professional), significantly increasing the minimum weekly salary below which employees must be paid overtime regardless of their duties. This change moved the threshold substantially higher than the previous level, requiring employers to audit their exempt employee populations and either increase salaries above the new threshold or reclassify affected employees as non-exempt. Independent contractor classification rules have also been updated, with the DOL reinstating a multi-factor economic reality test that makes some previously classified contractors employees entitled to FLSA protections. Joint employer liability standards have been revised, affecting staffing agency, franchise, and subcontracting relationships. The federal minimum wage of $7.25 has remained unchanged since 2009 at the federal level, but more than half of states have minimum wages significantly above the federal floor, and many localities have adopted even higher local minimums. HR professionals must monitor both federal regulatory activity and state/local law changes in every jurisdiction where employees work. Aurora Training Advantage's HR training keeps practitioners current on wage and hour regulatory developments that affect employer compliance obligations.

The Fair Labor Standards Act (FLSA) requires employers to pay overtime (1.5x the regular rate) for all hours over 40 per week to non-exempt employees, but provides several exemptions for executive, administrative, professional, outside sales, and highly compensated employees. For the white-collar exemptions (executive, administrative, professional), two criteria must both be met: the salary basis test (the employee must be paid a predetermined, fixed salary that is not subject to reduction based on quality or quantity of work) and the salary level test (the salary must meet or exceed the current weekly minimum threshold). The duties test (the employee's primary duty must involve management, or the exercise of discretion and independent judgment with respect to matters of significance, depending on the category) is a third element. The DOL's 2024 final rule significantly raised the salary level threshold for the standard exemptions and also raised the threshold for the Highly Compensated Employee (HCE) exemption. The specific amounts should be confirmed against current DOL guidance as these thresholds continue to evolve. Employers must audit all employees currently classified as exempt to determine whether they continue to meet both the salary level and duties tests under the new thresholds—and must either raise salaries or reclassify affected employees as non-exempt before the effective date. Misclassification carries significant liability: back overtime pay for up to two years (three years for willful violations), liquidated damages equal to the back pay amount, and attorney fees. Aurora Training Advantage's HR training covers FLSA exemption compliance for employment law practitioners.

A proactive wage and hour audit is one of the most valuable HR compliance investments an organization can make—identifying and correcting issues before a DOL investigation or employee lawsuit at a fraction of the potential liability cost. The audit should begin with a complete inventory of employee classifications: for each job title, document the salary, the exempt classification category claimed, and the specific duties rationale for that classification. Job descriptions should be reviewed against the actual duties employees perform, as mismatches between documented and actual duties are among the most common audit findings. Salary testing should confirm that all exempt employees meet the current salary level threshold and that salary deductions are not being made in ways that destroy the salary basis. For non-exempt employees, review timekeeping practices to ensure all hours worked are being recorded and compensated—including pre-shift and post-shift work, meal period interruptions, training time, travel time, and remote work hours that may not be systematically captured. Off-the-clock work risks are heightened in remote and hybrid environments where the boundaries between work time and non-work time are less defined. Regular rate of pay calculations for overtime should be verified: bonuses, certain incentive pay, and shift differentials must be included in the regular rate used for overtime calculations. State wage and hour laws—which often impose more stringent requirements than the FLSA—must be layered into the audit for each relevant jurisdiction. Aurora Training Advantage's HR and payroll training supports practitioners in conducting systematic wage and hour compliance audits.

Independent contractor classification under the FLSA has been a persistent compliance challenge, and the DOL's regulatory approach has shifted significantly with different administrations. The DOL's 2024 final rule on independent contractor classification under the FLSA reinstated the traditional multifactor 'economic reality' test to determine whether a worker is an employee or an independent contractor for purposes of minimum wage and overtime protections. Under the economic reality test, no single factor is determinative; the totality of the relationship is considered. The factors include: the opportunity for profit or loss depending on the worker's managerial skill; investment by the worker and potential employer; degree of permanence of the work relationship; nature and degree of control; extent to which work is integral to the employer's business; and skill and initiative. This multifactor test replaced a shorter two-factor test adopted under the prior administration, effectively making it harder to classify workers as independent contractors. Misclassification remains one of the most significant and costly wage and hour compliance failures: misclassified employees are entitled to minimum wage, overtime, FMLA protections, and other employment law protections that independent contractors do not receive, plus IRS self-employment tax may have been improperly shifted to the worker. State law tests (California's ABC test being the most stringent) often impose additional requirements. Aurora Training Advantage's HR training covers independent contractor classification under both federal and state standards for compliance professionals.

Certain wage and hour practices generate disproportionate DOL investigation activity and employee litigation risk because they involve systematic underpayment of large groups of workers—creating potential class or collective action exposure that can produce eight-figure liability in large organizations. Automatic deductions for meal breaks without verifying that employees are actually relieved of all duties for the full period is one of the highest-risk practices; employees who work through 'recorded' lunches are entitled to pay for that time. Rounding practices that systematically reduce recorded time below actual time worked violate the FLSA even if the rounding policy appears neutral on its face. Requiring or permitting employees to work off the clock—either before punching in, after punching out, or during recorded break periods—creates liability for all uncompensated time. Not counting mandatory training time as compensable hours is a common error, particularly for onboarding and compliance training. Failing to include non-discretionary bonuses and certain other compensation in the regular rate of pay for overtime calculation understates overtime for affected employees. Misclassifying hourly employees as exempt creates overtime liability for all hours over 40 per week. In agricultural, retail, and service industries, tip credit violations—paying tipped employees a sub-minimum wage without meeting all FLSA tip credit requirements—carry significant back pay exposure. DOL investigations often begin with a single employee complaint but expand to cover all employees in the same classification at the same worksite. Aurora Training Advantage's HR training helps practitioners identify and address these high-risk wage and hour practices proactively.