The rule, last revised in 2019, will be open for public comments soon. Employers should be prepared to review their policies on overtime and employee exemptions during the rulemaking process.
08/31/2023 12:55 P.M.
3 minute read
The U.S. Department of Labor (DOL) has proposed changes to its overtime rule that would restore and extend overtime pay for salaried employees.
The Notice of Proposed Rulemaking (NPRM) would update the regulations under the Fair Labor Standards Act (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.
With the proposed increase in the overtime salary threshold from the current $35,568 to the $55,000 mark, approximately 3.6 million workers would be eligible for overtime pay under the proposed rule, according to the DOL.
The last overtime salary threshold increase was made in 2019 and took effect in 2020, prompting accounts receivable management companies to review and update overtime and employee exemption policies.
If the threshold increases, 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.
George Huyler, vice president of human resources at ConServe, told ACA International in a Collector magazine interview when the rules changed in 2016 that while the majority of his company’s employees are nonexempt, they reviewed all positions that didn’t meet the salary threshold to get a handle on who worked overtime—and how often.
This included not only hours logged at the office, but also all off-site time as well.
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.
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.
The DOL also proposes to increase the annual compensation requirement for “highly compensated employees” to $143,988, which is based on the annualized weekly earnings of the 85th percentile of full-time salaried workers nationwide.
There would be automatic increases to the overtime threshold every three years if the rule is approved.
“The sizable hike means that, if the rule goes into effect as proposed, employers may have many employees whose salary falls between the current threshold and the proposed new threshold,” Brett Coburn, attorney with Alston & Bird, told the Society of Human Resource Management. Employers “will have to decide whether to increase the salaries for those employees to get them up over the new salary threshold, or to convert the employees to nonexempt and start paying them overtime,” he said in an article on the proposed rule.
If the rule is finalized, there could be a challenge in court—which was the case with the 2016 overtime rule, Coburn said in the article. That could mean uncertainty in the implementation of an updated rule, but Coburn recommended employers start reviewing plans for compliance now.
The proposed rule would not change the standard duties test, which exempts employees if they can demonstrate that they perform managerial tasks.
“As long as it is paired with an appropriate salary level requirement, the standard duties test can appropriately distinguish bona fide EAP employees from nonexempt workers,” the DOL said in frequently asked questions on the proposed rule.
Upon publication in the Federal Register, the NPRM will be open for public comment for 60 days. The DOL will consider all comments received before publishing a final rule. Learn more about the proposed rule and instructions for submitting comments.