The Fair Labor Standards Act (FLSA) establishes a threshold for calculation of overtime eligibility. From 2004 until 2020, that salary threshold was $23,600 ($455 per week). In January 2020, the Department of Labor (DOL) raised the salary threshold to $684 per week or $35,568 per year. Employees earning less than that threshold became eligible for overtime pay at time-and-one-half their regular rate of pay when they work more than 40 hours in a workweek. The 2020 increase was considered a compromise to the approximate $921 per week ($47, 892 annually) increase originally proposed by the DOL at that time. Now, just three (3) years later, the DOL is expected to propose and finalize a new increase.
The lessons of historical context are important. This proposed increase has been part of the DOL agenda for the past year to eighteen (18) months. It was originally anticipated in April of last year. The deadline for proposal has now been twice extended, first to October 2022 and now to May of 2023. Of course, it could be delayed again. Once more, if published, it will go through the usual vetting process of comment, modification, and potential legal challenge. However, as history has demonstrated, some enhancement is coming. The proposed changes have spanned three (3) U.S. Presidents, both political parties, and almost two decades of debate and advancement. The proposed changes are likely - all that remains is a determination of when and at what cost.
At this point, it is unclear how far the DOL will extend the proposed increase. Some proponents argue for an extension to $1,000 per week or $52,000 annually. Early reports suggest a more modest yet significant increase in the range of $800 per week or $41,600 annually. Again, this would provide employees earning less than that threshold amount with eligibility for overtime for any workweek in which they work more than 40 hours. This would, in turn, present heightened labor costs for many employers.
This proposed increase is announced at a difficult time for most employers. Post-COVID, employers are challenged by new work expectations of employees, an inability to find suitable staffing candidates, heightened costs, inflation and a struggling marketplace. Many employers are tasked with redefining how they structure their business, retaining and attracting talent, and discovering new revenue streams while identifying solutions for lost leads and business relationships. Employers must consider how to control the cost of business, particularly labor costs including reduction in overtime, potential use of temporary staffing agencies, hiring incentives and bonuses, as well as revigorated onboarding strategies and techniques.
It is important for employers to understand the potential impact of the proposed increase. We anticipate both a comment and grace period before implementation of any final rule. Depending on the final threshold, these periods may be further tolled by legal challenge. However, given the recent historical evolution and address by both political parties, some change is expected. Employers need to prepare for managing and mitigating the impact of that change.
If you have any questions or need assistance with the development of a business strategy, please feel free to contact Jim Devine, Esq. at jfdevine@c-wlaw.com or 1-888-488-2638.
DISCLAIMER:
The information in this article is provided for general informational purposes only and may not reflect the current law in your jurisdiction. By reading this article, you understand that there is no attorney-client relationship between you and Cipriani & Werner, P.C., or any of our attorneys. No information contained in this article should be construed as legal advice from Cipriani & Werner, P.C. or the individual authors.