Labor Department Seeks 55% Boost in Overtime Threshold

Labor Department Seeks 55% Boost in Overtime Threshold

PublIshed on Sep 21, 2023

The U.S. Department of Labor on Aug. 30 released a notice of proposed rulemaking that would increase minimum pay for salaried workers exempt from overtime requirements under the Fair Labor Standards Act (FLSA). The proposed rule would establish a threshold of $1,059 per week, which is equivalent to $55,068 annually. The current exempt threshold, established in 2019 and effective since Jan. 1, 2020, is $684 per week, which is equivalent to $35,568 annually. The change would represent a nearly 55% change in minimum salary.

Under the FLSA, employees must receive overtime pay for hours worked in excess of 40 in a workweek unless they fall within an executive, administrative or professional (EAP) exemption. To fall within this exemption, employees generally must be paid a salary that meets or exceeds the federal threshold and primarily perform executive, administrative or professional duties.

The Department of Labor proposes to increase the exempt threshold, it explains, because during the past three years “salaried workers in the U.S. economy have experienced a rapid growth in their nominal wages, which lessens the effectiveness of the current salary level threshold.” The proposal would automatically update the salary threshold every three years.

The Department of Labor estimates that the proposed rule would cost employers $1.2 billion in its first year and affect more than 3.6 million workers.

According to The New York Times, the Obama administration in 2016 sought to raise the overtime cutoff for salaried employees to about $47,500 from $23,500. However, a federal judge concluded that the Department of Labor lacked the authority to raise the threshold so substantially and suspended the rule.

For more information about the newest proposal, read the notice of proposed rulemaking here, a Department of Labor FAQ here.

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