No revised overtime regs yet: Questions linger about future payroll expenses

The Department of Labor (DOL) has been planning for over a year to revise its overtime exemption regs, with May as its latest deadline. So is the rule imminent?

We’d all like to know.

After all, if the salary threshold increases dramatically, a segment of your employees may no longer be exempt from the overtime provisions of the Fair Labor Standards Act (FLSA).

That means you’d either have to raise their salaries or start paying them OT if they work more than 40 hours in a workweek.

Overtime rule revisited

Just a few years ago, businesses experienced similar uncertainty regarding overtime regulations. The DOL revised the regs in 2016, raising the salary threshold from $23,660 to $47,476. That rule was finalized, only to be halted.

A subsequent rule landed us on the current amount: $35,568. That’s where it’s stayed since 2020.

May 2023 was the deadline the DOL set, in its fall regulatory agenda, to once again update the salary level requirements for executive, administrative and professional exempt employees.

In that agenda, the DOL also noted it aims to revise the salary threshold more frequently than in the past. Not only that, the total compensation levels for highly compensated employees (HCEs) should also be reviewed more often, the DOL said in its agenda. Currently, to qualify as exempt, HCEs must be paid a salary of at least $107,432.

Legislation on salary threshold

If you’re wondering how high the salary level might go for executive, administrative and professional exempt employees, the DOL hasn’t given any indication.

However, you could use federal legislation introduced earlier this year as a point of reference.

The Restoring Overtime Pay Act of 2023 (SB 1041) was introduced March 29, 2023.

That bill says that to pass the salary level test – and qualify as exempt from the overtime provisions of the FLSA – executive, administrative and professional employees would need to be paid at least:

• $45,000 in 2023 (and that would kick in immediately)
• $55,000 in 2024
• $65,000 in 2025, and
• $75,000 in 2026.

The legislation has only a 39% chance of being enacted, according to GovTrack.

We’ll continue to monitor the legislation and any proposed rules released by the DOL.