The overtime debate is back. Did you miss it? On Aug. 30, 2023, the U.S. Department of Labor (DOL) issued a long-expected proposal to update the Fair Labor Standards Act’s overtime exemptions. At its heart is a new salary threshold of $55-60k annually with automatic increases built in.
The proposed salary threshold for overtime eligibility is $1,059 per week or roughly $55,068 annually. That’s a more than 50% increase from the current amount. However, HR Dive points out that the DOL footnotes, “the final rule would include a threshold based on the most recent wage data available. Depending on how long the process takes and the calculation used, that could be more than $60,000…The proposal also adopts automatic increases for the threshold, something the Fair Labor Standards Act regulations do not currently include.”
The proposal also increases the annual salary level for employees to qualify for the highly compensated exemption. Employees must earn at least $143,988 annually (up from $107,432) to qualify for the exemption. There are no changes to the salary test and job duties test.
The DOL is accepting comments on the proposed regulation through Nov. 7, 2023, and organizations like The U.S. Chamber of Commerce are chiming in. Marc Freedman, the Chamber’s Vice President of Employment Policy, calls it the “wrong rulemaking at the wrong time” for several reasons:
- Many workers on the cusp may be forced to give up their salaried status and become hourly or gig employees punching a time clock. “To reclassify some of these employees and put them on the clock will jeopardize their ability to work remotely, which has been a boon to many workers and their ability to juggle personal responsibilities such as childcare with their professional obligations,” Freedman explains.
- The economy makes the move especially problematic. “Employers continue to struggle to find enough employees and have to pay higher wages as a result. Increasing the cost of labor even further through this regulation will add to their burdens and will be felt particularly severely among small businesses, and charitable nonprofits who can’t just increase prices because they are dependent on contributions to maintain operations,” he says.
- Footnoting the possibility that the threshold could go as high as $60,000 by the time the regulation is passed “is a clear ‘bait and switch,’” Freedman adds, calling it an automatic escalator clause that is legally questionable.
- Freedman points out that the regulation includes a bold “severability clause” to try to preserve the rest of the regulation if parts (particularly the escalator clause) are struck down by a court. “This is a relatively rare concept for a regulation as agencies cannot dictate to courts how a regulation will be treated if challenged…DOL is simply trying to make sure that if the escalator is struck down, the underlying threshold increase will be retained,” he says.
If you’re affected by overtime regulations, learn more about the proposal and weigh in with your concerns. As has been the case in the past, legal experts warn not to wait until the legislation passes to review your practices, who among your staff may be affected, and what changes may need to be made to comply with the new rule and each of its potential nuances.
