Heatwave Compliance: Navigating the New 2025 Overtime Rules

As temperatures rise, so do the stakes for employers and employees trying to stay cool under the Fair Labor Standards Act (FLSA). On July 1, 2025, the Department of Labor’s updated overtime rule takes effect—raising salary thresholds, clarifying duties tests, and reshaping who qualifies for overtime pay. Whether you manage payroll or punch a time clock, understanding these changes is essential to avoid costly back‑pay claims, fines, and employee dissatisfaction. Below, we break down the key provisions of the 2025 overtime rule and offer practical steps to ensure your workplace stays in full compliance.

Understanding the 2025 Overtime Rule Changes

• The standard salary threshold for exempt “white‑collar” employees increases from $684 to $844 per week (equivalent to $43,888 annually)
  
• The “highly compensated employee” exemption salary level rises to $132,964 per year
  
• No changes to the duties tests for executive, administrative, and professional exemptions—focus remains on job responsibilities, not job titles
  
• The rule applies nationwide and updates automatically every three years based on wage growth (DOL FLSA Overview ) citedol
  

The DOL’s biennial update mechanism ensures that salary thresholds keep pace with inflation and wage growth. Employers who previously classified workers as exempt solely based on outdated salary levels must now re‑evaluate those designations. Failing to adjust can trigger wage‑and‑hour investigations and expose companies to significant liability. Reviewing these threshold changes early—ideally before mid‑2025—gives organizations time to budget for payroll adjustments or consider reclassification strategies.

Determining Exempt vs. Nonexempt Status

• Salary Basis Test: Employee must receive a predetermined salary not subject to reduction based on quality or quantity of work
  
• Salary Level Test: Meets or exceeds the new $844 weekly threshold (or $132,964 for HCEs)
  
• Duties Test: Primary duties must involve executive, administrative, or professional tasks as defined in 29 C.F.R. Part 541 (eCFR Part 541) citeecfr
  

Classifying a worker as exempt requires satisfying all three prongs. Even if an employee’s job duties clearly fall under an exemption, failing the salary level test automatically renders them nonexempt—and eligible for overtime. Conversely, meeting the salary threshold does not guarantee exempt status if the duties test isn’t met. Employers should conduct detailed job‐by‐job analyses, documenting how each position aligns with FLSA criteria to withstand potential audits.

Impact on Employers and Employees

• Employers must audit existing classifications, adjust salaries, or convert certain roles to hourly status
  
• Employees previously classified as exempt may see shifts to time‑tracking systems and eligibility for time‑and‑a‑half pay for hours over 40
  
• Payroll systems need updates to calculate overtime based on revised salary bases and workweek definitions
  
• Failure to comply can result in back‑pay awards, liquidated damages, and civil money penalties (DOL Overtime Final Rule ) citedol
  

Organizations of all sizes face practical challenges: budget constraints may limit salary increases, while timekeeping infrastructure may lack the flexibility to handle reclassified positions. For employees, the prospect of earning overtime can mean a significant boost in take‑home pay, but also new requirements to log hours and request approvals for overtime work. Transparent communication and training will be key to smoothing the transition.

Calculating Overtime Pay Under the New Standards

• Overtime must be paid at 1.5 times the “regular rate” for all hours worked over 40 in a workweek
  
• Employers should include nondiscretionary bonuses, shift differentials, and commissions in the regular rate calculation
  
• Rounding practices (e.g., to the nearest five minutes) must be fair and applied consistently
  
• Compensatory time (“comp time”) in lieu of overtime pay remains prohibited for private‑sector employers (Federal Register Final Rule) citefr
  

Properly computing the regular rate can be complex when multiple pay components are involved. For example, a sales representative’s commission payments and production bonuses may need to be prorated into the regular rate. Employers should verify that payroll software correctly aggregates all qualifying compensation and applies the new salary thresholds to avoid underpayment.

Preparing for Compliance: Best Practices

• Conduct a comprehensive audit of all current exempt positions against the updated salary and duties tests
  
• Update employee handbooks and policy manuals to reflect new overtime eligibility and record‑keeping requirements
  
• Train supervisors and HR staff on identifying compensable work, approving overtime, and maintaining accurate time records
  
• Communicate changes clearly to employees—provide written notices of reclassification and explain how overtime will be tracked and compensated
  

Early planning is critical. Employers may opt to increase salaries to maintain exempt status for key roles or embrace a hybrid approach—offering a blend of salary and hourly pay for employees whose duties straddle exemption lines. Documenting every step of the review process helps demonstrate good faith compliance in the event of an audit or claim.

Gordon Law Group Can Help

Navigating complex wage‑and‑hour regulations is no small task. Gordon Law Group’s attorneys have decades of experience guiding employers and employees through FLSA compliance, audits, and litigation. Visit us at gordonllp.com or explore our Wage & Hour Practice for in‑depth resources. Ready to ensure your policies meet the new 2025 overtime standards? Contact us today or call (617) 536-1800 for a free consultation. Let our award‑winning team help you beat the heat of noncompliance and protect your bottom line.