31 August 2023

U.S. Department of Labor Proposes to Significantly Expand Eligibility for Overtime

On August 30, the U.S. Department of Labor proposed a new overtime rule that would raise the salary threshold for the “white collar” exemptions to $1,059 per week, or $55,068 per year—almost $20,000 more than the current $35,568 annual salary threshold.  The rule is still only “proposed,” but if it goes into effect the government estimates that more than three million additional workers will be eligible for overtime, and that total wages across the country will increase by more than $1 billion per year.

By way of background, the “white collar” exemptions are exemptions from the Fair Labor Standards Act’s requirement to pay overtime.  The most common exemptions are for executive, administrative, and professional employees.  Employees who qualify for these exemptions are not entitled to overtime pay.

To be properly classified as exempt, employees must satisfy the “duties test” and the “salary basis test.”  The salary basis test requires that the employer pay the employee a weekly salary that is equal to or greater than a threshold amount.  That threshold amount is currently $684 per week, but the DOL’s proposed rule would increase the amount to $1,059 per week.

The proposed rule does not propose any changes to the duties tests, which could be a roadblock to its implementation.  In 2016, the Department of Labor proposed increasing the annual salary threshold from $23,660 to $47,800.  That proposal was struck down by a federal judge in Texas, who ruled that such a significant increase in the salary threshold rendered the duties test irrelevant.  The current proposal will almost certainly be challenged in court, and, given the significant increase, it could be susceptible to the same critique.

For now, employers need to be aware of the proposed rule, but they do not need to make any changes—yet.  The DOL will accept public comments on the proposal for 60 days, finalize the proposed rule, and announce its implementation date—which will lead to litigation.  Nonetheless, this is a good time for employers to start reviewing their workforce and identifying employees who may be affected if the rule goes into effect.

Please reach out to your favorite Miller Johnson employment attorney if you have any questions.