Question

I have heard that the government is raising the overtime threshold for some employees. Is that true and do you have any details?

Answer

It is true. The Wage and Hour Division (WHD) of the U.S. Department of Labor released the proposed regulations officially on September 8 when it published the official proposal in the federal register. The proposed changes to the so-called “white collar” regulations would increase the number of workers eligible for overtime by an estimated 3.6 million workers.

The proposal must still go through a 60-day comment period and the comments must be reviewed by WHD. A final rule will be published probably late this year or early next year. If history is a guide, there will be a legal challenge as well. While it’s important for employers to be aware that this proposal is moving forward, employers need not take any action until the final rule is published and any court challenges have been dismissed.

WHD in August proposed to increase the minimum weekly salary for exempt (salaried) employees to $1,059 per week, or about $55,000 per year. That is an increase in the salary ceiling of $375 a week from the current salary threshold of $684 per week.

The most recent revisions to the white-collar salary threshold were adopted in 2004 ($455) and 2020 ($684). If adopted, the government projects that it will result in approximately 3.6 million more workers becoming eligible to receive overtime under the federal Fair Labor Standards Act (FLSA).  There is also an increase in the compensation threshold for employees considered to be highly compensated and therefore also exempt from the FLSA’s overtime requirement.

The proposed revisions include the following:

• Increases the standard salary threshold;
• Increases the highly compensated employee total annual compensation threshold from $107,432 to $143,988.
• Includes an automatic updating mechanism that would allow for the timely and efficient updating of all the thresholds to reflect current earnings data.

The proposal was published in the Federal Register on September 8. Interested parties will have up to 60 days (no later than November 7, 2023) to submit comments regarding the proposal. Comments may be filed electronically or in writing.

While we do not yet know exactly which measures will be included in the final rule, employers can prepare for the expected increase in the salary threshold by identifying their FLSA-exempt employees whose annual salary is less than $55,000.  That group is likely to become overtime eligible once the final rule is issued. A more comprehensive audit of the employer’s pay practices is also advised, because adjustments to the affected employees’ compensation must also comply with the Massachusetts Pay Equity law.

Members with questions about human resources matters may call the AIM HR Helpline at 800-470-6277.