Comments on the Department of Labor’s proposal also note that most employees will not see an increase in pay through revised regulations on salary exemptions. Plus, HR expert shares what companies should do right now.
11/17/2023 2:25 P.M.
3 minute read
ACA International joined the Partnership to Protect Workplace Opportunity (PPWO) and more than 200 organizations representing employers from a range of industries in comments urging the U.S. Department of Labor (DOL) to reverse course on its proposal to increase the minimum salary for employees exempt from overtime pay requirements under the Fair Labor Standards Act (FLSA).
The Notice of Proposed Rulemaking (NPRM) would update the regulations under the FLSA “implementing the exemption from minimum wage and overtime pay requirements for executive, administrative, and professional employees.”
It would guarantee overtime pay for most salaried employees paid less than $1,059 per week, or about $55,000 per year, according to a news release from the DOL.
Through the proposed rule, the DOL seeks to update and revise the regulations for determining whether certain salaried employees in executive, administrative or professional roles (EAP), also classified under the FLSA as the “white collar exemption,” would qualify for the guaranteed overtime pay, ACA previously reported.
The DOL received more than 33,000 comments on the proposal.
PPWO noted in its comments that, if approved, employers would have only 60 days to implement the changes in a final rule, including determining whether to raise an employee’s salary, reclassify their employment as hourly or restructure their job to distribute work differently, which may result in employee turnover.
The DOL estimates there are 3.6 million workers who are currently exempt white-collar employees, which employers would have to review for salary and job status under the new rule.
Additional employer concerns outlined in the PPWO comments include:
- Employees will have fewer opportunities for flexible and remote work and career development.
- Employees will have fewer opportunities for part-time work.
- Most employees will not receive additional compensation, and some employees may see a reduction in pay.
- Businesses, nonprofits, schools, local governments and workers in rural and other low-cost areas will be hit the hardest.
- The department’s proposed rule is unlikely to withstand judicial scrutiny.
The DOL’s rule in 2016 was challenged in court for its high salary threshold and blocked by a federal judge, but the department moved forward with an update that was finalized in 2019, prompting accounts receivable management companies to review and update overtime and employee exemption policies, ACA previously reported.
Steps You Can Take Right Now
ACA members should consider reviewing their salary and overtime policies now with what is proposed by the DOL.
Jessica Mobley, director of human resources and client relations for KLS Financial Services, suggested companies review all current salary-exempt employees:
- Identify whose earnings are below the proposed minimum (about $55,000/year) and decide if you are prepared to raise them.
- If not, you should re-evaluate their position and classification.
Keep in mind that it is not ideal to have two people in the same position where one is salaried and one is hourly, which is an issue the DOL plans to address in the proposed rule. If you aren’t prepared to raise salaries, and you do not want certain employees’ position/role to change, then you must pay them overtime should they work over 40 hours per week.
“This rule mostly affects our management and administrative teams, but we do have senior collectors that fall into the salary-exempt classification as well so all will have to be reviewed,” Mobley said.
If the threshold increases under the new NPRM, and you employ salaried, full-time staff whose pay is below the minimum exemption, you will have some decisions to make. For instance, you may:
- Increase their salaries and/or bonuses to meet the threshold so they remain exempt, and therefore able to work overtime without receiving extra pay;
- Maintain their current pay and limit them to 40 hours a week; or
- Opt to pay them overtime—perhaps on a pre-approved basis.
You may need to create a new approval process for overtime or off-hours work, in addition to updating policies on scheduling, commissions and bonuses.