Client Alert August 31, 2023 Dominic T. Clolinger

Department of Labor Proposes Rule to Increase Salary Threshold for Overtime Exemptions

On August 30, 2023, the United States Department of Labor (“DOL”) announced issuance of a Notice of Proposed Rulemaking (“Proposed Rule”) which would amend regulations associated with Section 13(a)(1) of the Fair Labor Standards Act (“FLSA”).  The FLSA governs federal minimum wage and overtime requirements for employers. Section 13(a)(1) of the FLSA exempts from the minimum wage and overtime pay requirements “any employee employed in a bona fide executive, administrative, or professional capacity.”  To be considered exempt, employees generally must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed.

The Proposed Rule would alter the threshold salary required to be considered for the above exemption. Specifically, the rule would increase the standard salary level to the 35th percentile of weekly earnings, or $1,059 per week ($55,068 annually for a full-year worker).  To be considered for the highly compensated employee exemption, the proposed rule would increase the compensation threshold to the 85th percentile of full-time salaried workers nationally, approximately $143,988 annually.  The DOL is also proposing to automatically update these earnings thresholds every three years with current wage data to maintain their effectiveness.  The Proposed Rule would also extend federal minimum wage and overtime protections to U.S. territories.  If adopted, the Proposed Rule will require employers to pay overtime to employees who no longer fit within the statutory exemptions due to the increase in salary thresholds.

The proposed rule is not final.  The notice of proposed rulemaking will be open for public comment for 60 days. A link to the proposed can be found here.  We will continue to monitor developments regarding the proposed rule.  If employers have specific questions about minimum wage and overtime requirements, employers should contact Nikole CanuteScott DwyerNate WolfKimberly Large, Dominic Clolinger, or Kathryn Zoller as soon as practicable.

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