What the new proposed DOL overtime rule could mean for you

The Dept. of Labor (DOL) is still thinking about updating FLSA overtime rules affecting executive, administrative and professional employees.

Based on the Biden administration’s regulatory agenda released on June 21, 2022, several reports indicate the DOL’s Wage and Hour Division is planning a Notice of Proposed Rulemaking for October.

However, the DOL has not yet finalized a release date, which would mark the beginning of a public comment period.

The most significant possible overtime rule change, which had some employers concerned, would raise the exempt employee pay threshold from the current $684 per week/$35,568 per year.

What overtime rule proposal may include

A proposed minimum salary amount hasn’t been released. However, some industry experts are predicting that it could be increased to $47,476 per year/$913 per week (a threshold amount previously mentioned in a 2016 Obama administration DOL final rule), or even higher.

The new OT threshold would likely be implemented in periodic increases. Anyone making under that amount would officially be nonexempt under the Fair Labor Standards Act (FLSA) and would have to be paid overtime if they work more than 40 hours in a workweek.

Some have suggested that the DOL may tie the threshold increase to the Consumer Price Index or some other economic marker.

It’s important to note that an increase to the OT threshold would only apply to employees who are paid a predetermined, fixed salary that can’t go up or down based on the quality or quantity of their work, according to the FLSA’s salary basis test.

So for example, a new threshold wouldn’t apply to outside sales employees who are already exempt, unless something changes.

What could happen

There’s no need to start making changes to your pay policies just yet. Remember, there’s still a chance the DOL may postpone the proposed rule release date. We’ll keep you posted.

If the overtime rule does become final, Payroll will have to take a look at your people’s salaries to determine who may become eligible for overtime after the update. Once you have that info, you can decide how to proceed (e.g., raising salaries, updating your overtime policy).

Also, depending on what the threshold amount is, and what employers and business groups have to say about it, the overtime rule change could still face legal challenges before it becomes finalized. Some will consider it an unnecessary mandatory pay hike.