The U.S. Department of Labor (DOL) on August 30, 2023, announced a notice of proposed rulemaking (NPRM) that would restore and extend overtime protections to 3.6 million salaried workers.
The NPRM proposes to update and revise the regulations issued under section 13(a)(1) of the Fair Labor Standards Act (FLSA) implementing the exemption from minimum wage and overtime pay requirements for executive, administrative, and professional employees.
The current FLSA standard salary level is $684 per week ($35,568 per year).
Key provisions of the new proposal include the following:
- Higher salary threshold – Raises to $55,068 per year ($1,059 per week)
- Highly Compensated Employees – Increases the total annual compensation requirement for “highly compensated employees” from $107,432 to $143,988 per year
- Future salary updates – Automatically updates earnings thresholds every three years so they keep pace with changes in worker salaries, and allowing employers to more easily adapt because they can anticipate when the updates would happen and how they would be calculated
- Duties Test – No changes to the overtime exemptions’ duties tests, which lay out the types of work that exempt employees must perform
- U.S. Territories – Restores overtime protections for U.S. territories
The DOL will invite the public to comment on this proposed rule for 60 days once it is published in the Federal Register. Once the comment period closes, the agency is required to take the comments into account and then determine any adjustments before the rule becomes final.
Changes to the FLSA minimum salary threshold are not common. When the law was first enacted in 1938, the salary threshold was set at $1,560 per year. Since then, the salary threshold has been raised only seven times.
The final rule almost certainly will be challenged in the courts. However this plays out in the coming months, employers can take this time to review their pay practices and prepare for compliance.
FrankCrum has a team of HR consultants, known as FrankAdvice. Clients of FrankCrum can reach out to their HR consultant for guidance and pertinent information to help with decisions about employee overtime eligibility. Not a client of FrankCrum? To learn more about FrankAdvice and the other PEO services offered at FrankCrum visit FrankCrum.com.