The U.S. Department of Labor (DOL) recently shook up the labor market with an announcement that could significantly impact 3.6 million low-paid salaried workers in the United States. Under the new rule proposed by the DOL, the new salary threshold for overtime pay eligibility under the Fair Labor Standards Act (FLSA) would be set at $1,059 per week or about $55,000 per year, up from the current salary level of $684 per week, or $35,578 annually.

Historically, the 40-hour workweek has been a cornerstone of American labor law, establishing a balance between work and personal life. Acting DOL Secretary Julie Su emphasized the importance of this balance, stating that low-paid salaried workers often work long hours without the benefit of extra pay, a situation the proposed rule aims to rectify.

So, What Does this Proposal Actually Involve?

The DOL’s focus is primarily on leveling the playing field between low-paid salaried employees and their hourly counterparts. Many salaried workers, despite performing similar tasks and often working more than 40 hours a week, don’t currently receive time-and-a-half pay for the extra hours worked above 40. The new rule intends to correct that. Additionally, the rule aims to more precisely identify roles and responsibilities that should be exempt from overtime under the FLSA—those belonging to executive, administrative, or professional employees. This will ensure that those who are not exempt will either have more free time or be compensated fairly for extra work.

Another essential element of the proposed rule is the establishment of an automatic update system for the FLSA’s salary threshold. Every three years, the DOL plans to adjust this figure to better reflect economic conditions and prevent erosion of overtime protections. And it’s not just the mainland U.S. that’s affected; the proposed rule also plans to restore overtime protections in those U.S. territories where the federal minimum wage applies.

What Does this Mean for Employers and Employees?

For employers, this proposal could mean significant changes. Employers will need to take a critical look at their workforce, especially those businesses employing low-paid salaried workers, to see how these changes will impact them. It may necessitate restructuring roles, job descriptions, and compensation packages. For employees, on the other hand, the proposal could lead to either a significant boost in income or more free time, better aligning their compensation with the actual hours worked.

Public input is a key part of shaping the proposed rule. The DOL has conducted extensive outreach, involving 27 listening sessions with over 2,000 participants. As the proposed rule moves through the legislative process, it’s crucial for stakeholders to participate during the public comment period, which closes at 11:59 p.m. ET on November 7, 2023.

The proposed DOL rule aims to bring a significant shift in how low-paid salaried workers are compensated for overtime, affecting both employers and employees. For more details, visit the Department of Labor’s notice for proposed rulemaking here.

And if you’re impacted by these potential changes or you have any questions, please contact Doug Taylor at (703) 525-4000 or rdougtaylor@beankinney.com.

This article is for informational purposes only and does not contain or convey legal advice. Consult a lawyer. Any views or opinions expressed herein are those of the authors and are not necessarily the views of any client.