U.S. Department of Labor Issues Proposed Rule to Expand Overtime Eligibility

On September 7, 2023, the U.S. Department of Labor (DOL) published a proposed rule to increase the minimum salary threshold for overtime eligibility under the Fair Labor Standards Act (FLSA). The proposed rule changes include an increase of approximately $20,000 to the required annual salary threshold for white-collar exemptions from the requirement to pay overtime compensation where applicable. The new proposed rule is likely to have significant consequences, as this substantial increase in the minimum salary threshold will greatly expand FLSA overtime eligibility for many workers throughout the country.

The FLSA requires that employees generally be paid at a rate of one and a half times their regular hourly rate of pay for all hours worked over 40 in any workweek. However, exemptions to overtime requirements apply to certain employees working in executive, administrative and professional capacities. To be classified as exempt from overtime under the FLSA, employees must both meet a job duties test and be paid on a salary basis at or above the minimum salary threshold. The FLSA also provides an overtime exemption for highly compensated employees for which the minimum salary threshold will increase from $107,432 to $143,988 annually under the proposed rule.

While the DOL’s proposed rule does not propose to implement changes to any of the job duties tests, the minimum salary threshold that many employees will now be required to receive to be lawfully considered for exempt status is $1,059 per week, or $55,068 annualized. As noted, this is a significant jump from the current minimum salary threshold of $684 per week, or $35,568 annualized.

Our Labor & Employment Law team is available to help employers navigate wage and hour compliance issues under the FLSA and related state and local regulations and guidance, and to provide counseling and assistance in addressing potential classification and reclassification issues as appropriate.

To learn more about the DOL’s proposed rule, see our Client Alert below.