Under an upcoming new overtime rule, the U.S. Department of Labor is expected to propose higher white-collar salary level thresholds, which means that more employees would become eligible for overtime pay under the federal Fair Labor Standards Act (FLSA).
Experts believe the DOL will propose an increase to the limit for an overtime exemption from the current minimum salary amount of $684/week.
Business groups are already fighting the proposal. The Partnership to Protect Workplace Opportunity, along with 93 business groups, has sent a letter to Secretary of Labor Marty Walsh, asking the DOL to “abandon or at least postpone issuance of its announced proposed rulemaking altering the overtime regulations under the Fair Labor Standards Act.”
The letter goes on to say that “[d]ue to significant concerns with supply chain disruptions, workforce shortages, inflationary pressures, and the shifting dynamics of the American workforce following the COVID-19 pandemic, any rule change now would be ill-advised.”
Under the FLSA, overtime pay of at least one and one-half times an employee’s regular rate of pay is required for work that exceeds 40 hours per week. Section 13(a)(1) of the FLSA includes a so-called “white collar exemption” from this rule for workers employed as bona fide executive, administrative and professional employees that are paid on a “salary basis” at a level of $684 or more per week.
In 2016, the Obama administration sought to increase the salary threshold for the exemption to $921 per week.
At the time, the U.S. District Court for the Eastern District of Texas barred the change from going into effect. The court found that Congress intended the decision around the issue to be related in part to “job duties” and not to create a “de facto salary-only test.”
Back then, the DOL determined that a $921 per week threshold would require overtime pay for more than 4.2 million more workers. While the court’s decision was pending on appeal, the Trump administration overturned the rule and increased the salary threshold for overtime from $455 to the $684 per week standard that is now in place.
What exactly the DOL will propose in its rulemaking, and whether the new threshold will be indexed to cost-of-living, is unknown.
Employee advocates argue that the DOL should match if not exceed the 2016 proposal of $921 per week. An increase of that extent is likely to lead to a fight in federal court. Others expect a middle-of-the-road increase in the ballpark of $800 per week.
Employers should be aware that the rule is coming, though there will likely be several months of lead time to prepare for implementation.