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Department of Labor Proposed Overtime Rule Changes

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On August 30, 2023, the U.S. Department of Labor (DOL) announced a proposed rule to amend current requirements that employees in white-collar occupations must satisfy to qualify for an overtime exemption under the Fair Labor Standards Act (FLSA). The proposed rule would make 3.6 million more U.S. workers eligible for overtime pay.

The DOL is proposing to increase the standard salary level from: $684 ($35,568 per year) to $1,059 per week ($55,068 per year); and $107,432 to $143,988 per year for highly compensated employees.

The proposed rule does not impact the duties test for the white-collar FLSA exemptions.

The DOL proposal also includes mechanisms that would allow the agency to automatically update the white-collar salary level thresholds every three years without having to rely on the rulemaking process.

When will the new rules take effect?

This is just a proposal and there are several steps that need to take place before the rules become effective. A notice and comment period will be open first. Business groups, states and others who may want to oppose the rules can make proposed changes or comments. The comments and proposed changes will be reviewed by DOL prior to final regulations implementation.

What can employers do to be prepared?

Start by identifying the exempt employees who currently earn below $55,068 annually. Consider tracking actual hours worked, which may assist with the decision-making process to raise their salary or convert their status to non-exempt.

Several considerations come into your decision-making process, which could include benefits such as vacation, PTO, sick leave or other policies that impact exempt staff differently than non-exempt staff.

As a reminder, overtime calculations must be paid considering their Regular Rate of Pay, which includes other types of compensation such as non-discretionary bonuses, commissions and shift differentials.

Consider the change from an exempt position to a non-exempt status may be viewed as a demotion and impact moral. The flexibility exempt status employees experience vs. tracking hours or punching into timeclocks, is one example. Prepare communications to the impacted employees. Review your policies regarding tracking of hours, meal and rest breaks, policies on using personal devices for work and prohibiting off-the-clock work time.

WE ARE HIRING A MANAGER FOR ONE OF OUR DEPARTMENTS AND WILL PAY THE EMPLOYEE A SALARY. ARE THEY EXEMPT FROM OVERTIME?

Job titles do not determine the FLSA exemption classification, and the fact that an employee is paid on a salary basis does not alone provide sufficient grounds to exempt the employee from the FLSA’s minimum wage and overtime regulations. For an exemption to apply, an employee’s specific job duties and salary must meet all the applicable requirements.

DETAILS TO DETERMINE THE FLSA CLASSIFICATION FOR POSITIONS WITHIN OUR COMPANY?

Refer to the Department of Labor site at dol.gov/agencies/whd/flsa.

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