On August 30, 2023, the United States Department of Labor proposed an update to federal wage and hour regulations. This new rule would expand the protections of the Fair Labor Standards Act and entitle millions more workers to overtime.

The DOL has proposed increasing the salary threshold for some of the most common exemptions to $55,068. This means that most employees who earn less than $55,068 per year, or $1,059 per week, will be entitled to overtime. As we have discussed previously, most overtime exemptions rely on both a duties test and a salary test. The exemptions affected by this rule are the executive, administrative, and professional exemptions, sometimes known as the “white collar” exemptions. Certain exemptions are not affected by this rule, including teachers and lawyers.

Currently, before implementation of this rule, the salary threshold is $35,568 per year, or $684 per week. This means that in order to be exempt from overtime, employees must perform duties that fall within one of the overtime exemptions and be paid at least $684 per week in the form of a salary. If the salary threshold is increased, millions more workers will not satisfy these “white collar” exemption tests and will be entitled to overtime even if they are paid salary, unless their pay is increased to $55,068 per year.

The Rule makes other changes as well, including automatically updating the salary threshold every three years with current wage data, to ensure that the real value of the salary threshold stays current. The salary threshold will also apply to certain U.S. territories including Puerto Rico and the Virgin Islands.

Who is the most likely to benefit? In our experience, there is a wide range of employees who are paid relatively low salaries and who nevertheless are considered exempt based on their duties. This includes retail managers and assistant managers, entry-level and non-licensed “white collar” professionals, administrative employees and secretaries, accountants and bookkeepers, help desk and low-level information technology/computer employees. Certain employees who perform technician work on construction and renovation projects, such as HVAC and fire and security installers, are also frequently paid salaries despite often falling outside the exemption. While it can be difficult to judge whether a certain employee is exempt or not based on their duties, this regulation would serve to automatically make millions more workers entitled to overtime, without parsing the details of their work. Most states follow the federal salary threshold, but certain states including New York and California have higher salary thresholds for all or some exemptions.

The downside? There is no guarantee this rule change will go into effect. A rule proposed by the Department of Labor in 2016 to increase the salary threshold to $47,476 per year was blocked by a federal judge the day before it was set to go into effect.  At that time, the salary threshold was $23,660 and would not be increased for over 3 years and to a much less extent than initially proposed. The Proposed Rule opened for public comments through November 7, 2023. Like the prior rule, this proposed change will undoubtedly be challenged in court, and its future is far from certain.

If you have any questions regarding the proposed overtime rule change or if you are concerned that your salary may fall below the current or a future salary threshold, contact the attorneys at Pelton Graham for a free consultation. You can reach us by the inquiry form on our website or by phone at 212-385-9700.