On August 30, 2023, the Department of Labor (DOL) announced a Notice of Proposed Rulemaking (NPRM) (Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees) that contains proposed updates and revisions to the regulations related to Section 13(a)(1) of the Fair Labor Standards Act. Section 13(a)(1) contains exemptions from minimum wage and overtime pay requirements for executive, administrative, and professional employees.
Key proposed revisions include:
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Raising the salary threshold to $1,059 per week (up from $684 per week), or $55,068 per year (up from $35,568 per year), to be exempt from over time (OT) pay. (The DOL notes that this will potentially impact 3.6 million workers.)
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Increasing the total annual compensation requirement for highly compensated employees to $143,988 per year (up from $107,432 per year).
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Outlining an automatic update provision for both the standard salary threshold and the highly compensated employee threshold every three years using “current wage data.”
The NPRM does not make any proposed changes to the duties test for determining overtime eligibility.
Once published in the Federal Register, the proposal will be subject to a 60-day public comment period before a Final Rule is issued. Once a Final Rule is issued, the changes will likely take effect within a few weeks.
Takeaways
Employers should budget for increased overtime costs for 2024. The proposed salary threshold increase of approximately $20,000 will likely impact numerous bona fide executive, administrative, professional, and outside sales employees as well as certain computer employees. Additionally, employees who were previously considered “highly compensated employees” could now be considered non-exempt from OT pay if their total annual compensations fall within the approximately $36,000 threshold increase.
This summary is for informational purposes only and is not intended to constitute legal advice. This information should not be reused without permission.
