Overtime Pay in Transition: A Closer Look at the Proposed Rules and What You Should Be Doing Now to Prepare

For many of us in HR, August 30, 2023, felt, as Yogi Berra would have put it, like “déjà vu all over again.”   In 2016, under the Obama Administration, the Department of Labor (DOL) had proposed and adopted an increase in the salary threshold for overtime exemption under the FLSA to $47,476.  In case you’ve forgotten, or your mind has blocked it out - the increase was overturned by a federal judge in Texas a mere 10 days before it was scheduled to take effect on the grounds that the DOL had exceeded its authority by raising the threshold too high. This happened after many employers had already made the changes necessary for compliance.  

On August 30 of this year, a similar proposal to update overtime pay regulations was announced leaving many wondering what it means this time around. Without a crystal ball telling us what parts of the proposed rule will go into effect or when, here is what we know so far…

The Department of Labor has proposed to:

• Increase the salary threshold for overtime pay exemption to $56,068 (from $35,568 – yes, that’s a big jump!).
• Increase the highly compensated employee threshold to $143,988 (from $107,432 – again, another sizable increase).
• Automatically update the salary thresholds every three years to align with the then-current earnings data.
• Restore overtime protection for U.S. territories.

The proposal does not include any changes to the duties tests for exemption.

• The “duties tests” are one of the three prongs used to determine if an employee qualifies for exemption and looks at the specific job duties in comparison to definitions outlined by the Department of Labor.

Employers have until November 7 to submit comments on the proposal which was published in the Federal Register on September 8.  

What we don’t know - Anything else. While that may sound alarming, based on what happened in 2016, there are actions employers should take now to get their proverbial ducks in a row. Stay tuned for our upcoming podcast episode that will answer what those steps are, as well as what to prioritize. 

Article contributed by Karen H. DiGioia