Last year, the U.S. Department of Labor (DOL) proposed a rule that would expand overtime protections to more than 3 million workers who are currently exempt from overtime. The rule would increase the minimum salary threshold applicable to the most common overtime exemptions – the executive, administrative, and professional – from the current amount of $684 per week ($35,568 annually) to $1,059 per week ($55,068 annually). This means that most salaried workers earning less than $55,068/year would be due overtime pay when working more than 40 hours a week. The final version of the overtime rule, which could be issued as soon as next month, may increase this threshold to closer to $60,000/year. The DOL’s proposed salary threshold rule would also automatically increase this threshold every three years.
That said, the DOL’s latest overtime rule will likely face legal battles in court that may prevent it from ever being implemented. You may recall that the DOL issued a similar overtime rule back in in 2016 that was ultimately invalidated by a federal court. That version of the overtime rule sought to increase the salary level requirement for exempt employees from $23,660/year to $47,476/year. Similar to the overtime rule proposed in 2023, the 2016 version also included a provision automatically raising the threshold every three years. But, just a few days before it was set to take effect, a federal district court in Texas invalidated the 2016 rule. The court found the DOL exceeded its authority by substantially increasing the salary threshold. The court also found that the automatic increase of the salary threshold every three years was unlawful for similar reasons.
So, What Do We Do Now?
Although there is a chance that the new overtime rule gets struck down by a court, as it did in 2016, this is no guarantee. For now, employers should plan as though the new minimum salary threshold for salaried workers will increase to at least $1,059 per week. Businesses with exempt workers who are earning less than this weekly salary need to think about either: (1) giving these employees a raise; or (2) reclassifying them as nonexempt. And, because the minimum salary might be to closer to $60,000/year in the final rule, exemption status for workers at or around this figure should also be examined.