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Navigating the Proposed Federal Overtime Salary Threshold Increase: What You Should Do Now to Prepare

By: Sara E. Choate, SPHR, SHRM-SCP

The Department of Labor (DOL) has recently proposed significant changes to the Fair Labor Standards Act (FLSA) that will impact organizations across the United States. The proposed revision seeks to increase the annual salary-level threshold for white-collar exemptions to overtime requirements from $35,568 to $55,068. Additionally, the DOL intends to implement automatic increases every three years to this threshold. Though the rule may change prior to and is likely to face legal challenges upon finalization, it is still a potentially significant obstacle for employers.

Here’s what your organization can do to prepare for whatever changes are ultimately finalized:

1. Identify Who Is on Salary:

  • Review your organization’s workforce and identify all employees currently:
    • Classified as exempt.
    • Receiving a salary lower than the proposed minimum weekly salary of $1,059, which is equivalent to $55,068 annually.

2. Understand Exempt vs. Non-Exempt Status:

  • Assess whether every salaried employee truly meets the criteria for exempt status.
    • Exempt employees must meet both salary and duties tests. They need to earn at least the salary threshold and perform specific job duties that classify them as executive, administrative, or professional employees.

3. Develop a Plan for Salary Adjustments:

  • For employees who will no longer meet the exempt criteria under the proposed rule, prepare a plan for if changes are implemented.
  • Consider whether you will increase their salaries to meet the new threshold or transition them to hourly wage status.

The proposed changes by the DOL are aimed at restoring and extending overtime protections to low-paid salaried workers who often work alongside hourly employees, performing similar tasks and working long hours. While these changes are designed to protect the rights and fair compensation of workers, they pose challenges for organizations. Therefore, proactive measures are crucial to ensure a smooth transition and compliance with the new regulations.

While the proposed overtime rule faces legal challenges and uncertainty, employers should not delay preparations. Identifying salary employees, understanding exempt vs. non-exempt status, and developing a plan for adjustments are crucial steps in ensuring compliance and fair compensation for your workforce. If you have questions about the proposed changes or on steps to prepare, contact us to learn more.

 

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