On August 30, 2023, the U.S. Department of Labor (DOL) put forward a rule that would raise the salary threshold under which employees are eligible for overtime pay under the Fair Labor Standards Act (the "FLSA"), to $1,059 per week, or approximately $55,068 per year, up from the current rate of $684 per week, or $35,568 a year. The proposed rule does not alter the exemption for bona fide executive, administrative and professional employees from the FLSA's minimum wage and overtime requirements, other than the raising this minimum salary. The Department of Labor estimates that the proposed rule would restore and extend overtime protections to 3.6 million workers and would automatically update the salary threshold every three years based on current earnings data.
Importantly, the proposal just released by the DOL is not yet law. There will be a notice-and-comment period, before the DOL must determine whether to adjust the proposed rule before making it final. Once finalized, the rule likely will face legal challenges in the courts, before potentially taking effect in 2024.
However, including because legal challenges may be unpredictable, companies should begin preparing for the new rule in the event it does goes into effect next year. Such preparation should involve reviewing employees who earn between $35,568 and $55,068, to audit whether the proposed rule is being adhered to. Companies should consider whether to update job descriptions to accurately reflect the actual duties of the subject job and ensure employees in this salary range are properly classified. Companies should also consider tracking actual hours worked of employees who fall into this salary range to determine whether to raise their salary to meet the new threshold or convert them to non-exempt. Companies will also want to consider how and in what fashion to communicate any changes to employees, including the potential impact on employee morale. Finally, employees who change status to non-exempt may need training as to scheduling and tracking hours to ensure compliance with overtime pay.
The proposed rule continues a recent trend from the DOL to provide greater protections to employees.
