Multiple factors make it practical for employers to prepare now for some change in overtime standards.
09/11/2023 2:40 P.M.
3.5 minute read
Comments on the U.S. Department of Labor’s proposed changes to overtime salary thresholds under the Fair Labor Standards Act (FLSA) are open until Nov. 7, according to a notice in the Federal Register.
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.
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.
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 International previously reported.
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 updates to the overtime threshold every three years if the rule is approved.
Be Prepared
Jessica Mobley, director of human resources and client relations for KLS Financial Services, said it is a good idea to prepare for the requirements in the proposed rule now.
Mobley 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 they plan 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.
Will the Rule Be Challenged in Court?
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.
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.
The need to review your company’s overtime policies and job descriptions and prepare for compliance now also comes down to timing.
“Just like in 2016, there is a real chance here that employers do not get court guidance on whether the rule will go into effect until very close to the effective date of the rule,” Brett Coburn, attorney with Alston & Bird in Atlanta, said in an article from the Society for Human Resource Management.
Interested parties can submit comments, identified by Regulatory Information Number (RIN) 1235–AA39, by either of the following methods:
- Submit comments through the Federal eRulemaking Portal at https://www.regulations.gov. Follow the instructions for submitting comments.
- Address written submissions to: Division of Regulations, Legislation, and Interpretation, Wage and Hour Division, U.S. Department of Labor, Room S–3502, 200 Constitution Avenue NW, Washington, DC 20210.
Learn more about the proposed rule and instructions for submitting comments.
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