Labor Department Proposes New Overtime Salary Threshold
More than 3 million workers would be newly eligible for overtime pay when they work more than 40 hours a week, under a new proposal from the U.S. Department of Labor. However, the suggested change is likely to face legal challenges.
On August 30, the Biden administration issued a Notice of Proposed Rulemaking from the Department of Labor to extend overtime pay eligibility to more than 3 million workers.
The initiative comes following a similar attempt by the Obama administration over eight years ago to revise overtime eligibility regulations under the Fair Labor Standards Act (FLSA). Under the new proposal, employers would be required to provide time-and-a-half pay for eligible workers who work beyond 40 hours per week. The previous threshold for this requirement set in 2019 by the Trump administration—$35,568—would be increased to $55,000.
Under FLSA, employees are entitled to receive premium overtime pay when they work over 40 hours per week, unless the employee is considered exempt from these requirements. Employees whose primary duties fall under the executive, administrative, and professional (EAP) exemption; who are paid on a salary basis; and whose compensation meets the minimum salary level are exempt from overtime requirements.
The Obama and Trump administrations both published regulations (“the overtime rule”) to adjust the salary threshold used to determine which employees are exempt. This issue is especially important to associations because many, if not most, association employees hold roles that qualify them as exempt from overtime, provided the salary basis and salary level tests are met.
However, the suggested change is likely to face legal challenges similar to those faced by the Obama-era rule, which was blocked by a federal judge in Texas.
ASAE has been very active over the years on this issue and will submit comments to DOL on this new proposed rule. The DOL overtime rule was identified as a major issue for association leaders, especially those outside of the Beltway. The nature of association work, specifically conferences and events where employees work overtime and may receive comp time instead of premium overtime pay, make this a particularly important issue.
While labor unions and advocacy organizations have expressed support, groups like the Partnership to Protect Workplace Opportunity have opposed the proposal due to concerns about increased labor costs causing businesses to fail and jobs to be lost. The proposal also includes a provision to update the salary threshold every three years based on income percentiles.
The proposed rule is subject to a 60-day public comment period from the date of publication in the Federal Register.