September 18, 2023

DOL: New Salary Requirements for Overtime Exemption

Written by
David W. Smith

DOLproposes new salary threshold under FLSA for overtime exemption.On August 30, 2023, the Department of Labor (DOL) announced a proposed rule that, if passed, will increase the minimum salary required in order to be exempt from the overtime requirements of the FLSA.   To state it most succinctly, the Fair Labor Standards Act (FLSA) requires that employers pay any employee working in excess of 40 hours during a week to pay that employee 1.5 times their standard hourly rate for those overtime hours.  The Act also provides substantial penalties for failure to do so including going back as far as three years to review unpaid overtime, doubling of the damages if the employer did not act in good faith, and finally, payment of fees, costs, and civil penalties.

It is essential that management of every company, regardless of industry, review this change and the impact on their organization, including preparing your company’s Human Resources and Payroll departments to be prepared for this change. Currently, in order to be exempt from the overtime requirement, the employee’s salary must be at least $684 per week ($35,568 per year).  However, under the new rule that amount will be increasing significantly, to $1,059 per week ($55,068 per year).  This represents a salary increase of more than fifty percent.  

Just as significantly, or even more so if we look at how long the current threshold has been in place, the amount required for the exemption will be increased every three years, with the adjustment linked to the 35th percentile of weekly earnings for full-time, salaried workers in the southern region.  

Finally, we note this is a proposed rule change, and thusthere is a comment period that will extend, at least, through October 30,2023.  Thus, given an opportunity toreview the comments and revise any portions of the rule deemed necessary, wewould anticipate this change to be effective in early 2024.