DOL to Look at Overtime Pay Threshold

TUESDAY, JUNE 22, 2021

At a House committee hearing earlier this month, Labor Secretary Marty Walsh revealed that the Department of Labor will again be reviewing the current overtime threshold under the Fair Labor Standards Act.

Walsh reportedly noted that the current threshold, which is just under $36,000 and was finalized in 2019, is “definitely” too low.

Reportedly, the department will include in its review whether regular, automatic updates to the threshold are necessary, which Walsh supports.

Overtime Threshold History

First announced in June 2018, the DOL stated that it planned to “clarify, update and define regular rate requirements” under the Fair Labor Standards Act, which notes that employers must pay covered employees at least one-and-a-half times their regular rate of pay in hours that are in excess of 40 hours in a workweek.

That regulation proposed a hike from the $455 per week ($23,660 per year) salary threshold to $913, or $47,476 per year, making about 4.2 million more workers eligible to receive overtime pay. This salary level was set in 2004 and was supposed to take effect in December of 2016, but groups and organizations from 21 states sought to block the rule in U.S. District Court.

At the time, the court ruled that the increase in salary level conflicted with the statute and rendered it invalid. However, not only did the DOL file an appeal to the decision in the U.S. Court of Appeals for the Fifth Circuit, it also filed a motion asking the Fifth Circuit to stay the appeal, effectively pushing pause on anything that had to do with the overtime hike as the DOL worked through its agenda under the new administration.

Following the ruling, January 2019 was slated to be the date for any new overtime regulations, however, it wouldn’t be until a few months after, in April, when the DOL would propose an overtime regulation, resulting in more than a million workers becoming eligible for overtime pay.

This proposal would boost the standard salary level to $679 per week (equivalent to $35,308 per year). Above this salary level, eligibility for overtime would vary based on job duties.

The DOL also proposed raising the total annual compensation requirement for highly compensated employees, which are subject to a minimal duties test, from $100,000 to $147,414, according to the National Law Review.

Other terms of the proposed rule include:

  • A commitment to periodic review to update the salary threshold. An update would continue to require notice-and-comment rulemaking.
  • Allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid annually or more frequently to satisfy up to 10% of the standard salary level.
  • No changes in overtime protections for police officers; fire fighters; paramedics; nurses; laborers including non-management production-line employees; and non-management employees in maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen and other construction workers.
  • No changes to the job duties test.
  • No automatic adjustments to the salary threshold.

The final ruling was issued in September 2019, with the minimum salary threshold for overtime eligibility cemented at $35,568.

Slightly higher from the initial threshold proposal of $35,308 to $35,568 ($684 per week), the new overtime rule also adjusted the total annual compensation requirement for highly compensated employees, lowering it from $147,414 to $107,432.

"For the first time in over 15 years, America's workers will have an update to overtime regulations that will put overtime pay into the pockets of more than a million working Americans," said former Acting U.S. Secretary of Labor Patrick Pizzella at the time.

"This rule brings a commonsense approach that offers consistency and certainty for employers as well as clarity and prosperity for American workers."

According to a DOL official, no changes will be made to the FLSA’s duties test and no time frame has been established for any automatic updates to the overtime eligibility threshold beyond what is already included in the final rule.

Employers had 99 days to comply with the rule, and it went into effect Jan. 1, 2020.


Tagged categories: Business matters; Department of Labor; Good Technical Practice; Government; NA; North America; Regulations

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