DOL Proposes Overtime Protection Rule

WEDNESDAY, SEPTEMBER 6, 2023


Last Wednesday (Aug. 30), the U.S. Department of Labor announced a notice of proposed rulemaking that would restore and extend overtime protections to 3.6 million salaried workers.

According to the DOL’s press release, the proposed rule would guarantee overtime pay for most salaried workers earning less than $1,059 per week, about $55,000 per year.

The announcement reportedly follows months of extensive outreach to employers, workers, unions and other stakeholders, which included the department holding 27 listening sessions with more than 2,000 participants to inform the proposed rule.

“For over 80 years, a cornerstone of workers’ rights in this country is the right to a 40-hour workweek, the promise that you get to go home after 40 hours or you get higher pay for each extra hour that you spend laboring away from your loved ones,” said Acting Secretary Julie Su.

“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. Today, the Biden-Harris administration is proposing a rule that would help restore workers’ economic security by giving millions more salaried workers the right to overtime protections if they earn less than $55,000 a year. Workers deserve to continue to share in the economic prosperity of Bidenomics.”

About the Rule

According to the DOL, the proposed rule would accomplish the following.

  • Restore and extend overtime protections to low-paid salaried workers: The DOL states that many low-paid salaried employees work side-by-side with hourly employees, doing the same tasks and often working over 40 hours a week. However, because of outdated and out-of-sync rules, these low-paid salaried workers aren’t getting paid time-and-a-half for hours worked over 40 in a week the DOL says. The department’s proposed salary level would reportedly help ensure that more of these low-paid salaried workers receive overtime protections traditionally provided by the department’s rules;
  • Give workers who are not exempt executive, administrative or professional employees valuable time back: The DOL says that, by better identifying which employees are executive, administrative or professional employees who should be overtime exempt, the proposed rule will better ensure that those who are not exempt will gain more time with their families or receive additional compensation when working more than 40 hours a week;
  • Prevent a future erosion of overtime protections and ensure greater predictability: According to the DOL, the rule proposes automatically updating the salary threshold every three years to reflect current earnings data; and
  • Restore overtime protections for U.S. territories: From 2004 until 2019, the department’s regulations reportedly ensured that for U.S. territories where the federal minimum wage was applicable, so too was the overtime salary threshold. The department says that the proposed rule would return to that practice and ensure that workers in the U.S. territories subject to the federal minimum wage have the same overtime protections as other U.S. workers.

The notice of proposed rulemaking will reportedly be open for public comment for 60 days upon publication in the Federal Register. The department says that it will consider all comments received before publishing a final rule.

The full notice of the proposed rulemaking can be found here.

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 included:

  • 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 were made to the FLSA’s duties test and no time frame had 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.

Then, during a June 2021 House committee hearing, former Labor Secretary Marty Walsh revealed that the DOL would again be reviewing the current overtime threshold under the Fair Labor Standards Act.

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

Reportedly, the department would include in its review whether regular, automatic updates to the threshold are necessary, which Walsh reportedly supported.

Industry Response

In response to the DOL’s latest announcement, the Associated Builders and Contractors issued a statement opposing the department’s proposed rulemaking.

“ABC is disappointed that the DOL is moving forward with a proposed overtime rule since multiple industries, like construction, are still grappling with the lingering economic consequences of inflation, global supply chain disruptions, rising materials prices and workforce shortages, all of which push operational costs ever higher,” said Ben Brubeck, ABC vice president of regulatory, labor and state affairs.

In May, the ABC, as a steering committee member of the Partnership to Protect Workplace Opportunity, as well as 103 other organizations, reportedly sent a letter to Su, urging her to abandon or at least postpone issuing the DOL’s proposed rulemaking that would alter the overtime regulations under the FLSA.

ABC also stated in its letter that the DOL’s last update to the overtime regulations went into effect in 2020—just three years ago, which the Association said “strongly suggest there is no need for urgency in issuing more changes.”

“It is unfortunate that the DOL did not listen to our repeated requests to abandon or postpone issuance of the proposed overtime rule until the current economic situation stabilizes or improves, allowing employees and employers to fully navigate the paradigm shift of work in America without new unnecessary and costly red tape,” said Brubeck.

   

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