A few months ago, we notified you about the U.S. Department of Labor‘s proposed new rule to increase the salary level for an employee to be exempt from overtime pay. The salary level is one of the requirements that must be met for an employee to be exempt. The proposed new rule would raise the required salary level to $1,059 per week ($55,068 per year for a full-time worker). The increase reflects the 35th percentile of weekly earnings of full-time salaried workers in the lowest-wage census region (currently the South). The DOL has now announced that it anticipates finalizing the rule in April, 2024.
The salary level was last adjusted effective January 1, 2020 when it was raised to the current $684 per week level (equivalent to $35,568 per year for a full-time worker). A previous DOL proposal to increase the level to $913 per week ($47,476 per year) was struck down by the courts in 2019.
The DOL’s proposed rule also would:
- Increase the salary threshold for highly compensated employees to be exempt from $107,432 annually to $143,988 annually. The increase reflects the earnings of the 85th percentile of full-time salaried workers nationally; and
- Implement automatic increases every three years to all salary thresholds.
Numerous business groups have given feedback to the DOL expressing concern and objections to the higher salary level. We do not yet know whether the DOL has taken those concerns into account and will reduce the level for the final rule. Unfortunately, we will likely not know for certain until the final rule is actually issued.
As we discussed in previous blogs, employers are again faced with some difficult decisions. If employees who are currently salaried are reclassified as hourly, they potentially will view the change as a loss of status or demotion, even though their compensation might actually increase if they work overtime. Employers will need to examine all positions with a salary of less than $1,059 per week and decide what changes are needed. This evaluation of positions should begin soon.
We will advise you when we have more information about the proposed rule and whether it is blocked by the courts.
John Falcone and Luke Malloy handle employment law matters at PLDR Law. Feel free to contact us if you have questions about this matter.
