A proposed change to overtime eligibility by the Department of Labor is causing a fair share of angst for many employers. Companies in the manufacturing and retail sectors will be impacted most.
The Biden administration is calling for a roughly 50% hike to the annual salary threshold for OT eligibility – from the current $35,568 to $55,000. The change would entitle about 3.6 million workers to OT according to Labor’s estimates. The real-world figure may be higher than that.
The proposed Fair Labor Standards Act rule would:
- increase the salary level to the 35th percentile of full-time salaried workers ($1,059 per week or $55,068 annually)
- raise the highly compensated employee requirement to the 85th percentile ($143,988 per year), and
- automatically update earnings thresholds every three years based on current wage data.
Labor last increased the salary threshold by 50% in 2019. “I’ve heard from workers again and again about working long hours, for no extra pay, all while earning low salaries that don’t come anywhere close to compensating them for their sacrifices,” says acting Labor secretary Julie Su. “Workers deserve to continue to share in the economic prosperity of Bidenomics.”
Rule could be final before 2024 election
The FLSA doesn’t allow small businesses exemptions to its guidelines. Neither does this proposed OT rule.
Industry groups representing retail, food, hospitality and manufacturing will be out in front of litigation to stay the OT rule. Those sectors frequently employ people in managerial positions that fall under the proposed $55K threshold.
Some employers will investigate automation and artificial intelligence solutions to replace workers. The food industry for one is gradually replacing humans with digital kiosks, robot busboys/busgirls and high-tech dishwashing machines to keep payroll costs in line.
The Biden administration has time to get the proposed reg finalized by September 2024. Click here for the rule. Once it’s published, Labor will take comments for 60 days.
