The U.S. Department of Labor has introduced a significant proposed rule that could substantially impact businesses and salaried workers across the nation. The comment period for this August 30th proposal is now open for 60 days.
Background
The Fair Labor Standards Act (FLSA) mandates that covered employers pay employees a minimum wage and overtime premium pay, typically at 1.5 times the regular rate, for hours exceeding 40 per week. Since its inception in 1938, the FLSA has included Section 13(a)(1), often referred to as the “white-collar” or executive, administrative, or professional (EAP) exemption. This exemption applies to employees in bona fide executive, administrative, or professional roles, as defined by the Secretary of Labor.
The EAP exemption historically hinged on three criteria: a fixed, non-reducible salary (the salary basis test), a minimum salary amount (the salary level test), and primary job duties of an executive, administrative, or professional nature (the duties test). Employers bear the responsibility of proving this exemption’s applicability, emphasizing that job titles and descriptions alone are insufficient.
To effectively modernize the EAP exemption, the Department of Labor is proposing new compensation thresholds. The standard salary level would align with the 35th percentile of weekly earnings for full-time salaried workers in the lowest-wage Census Region, translating to $1,059 per week or $55,068 annually for a full-year worker. Simultaneously, the highly compensated employee’s total annual compensation threshold would match the annualized weekly earnings of the 85th percentile of full-time salaried workers nationally, amounting to $143,988. These proposed thresholds draw upon the Secretary’s authority under the FLSA, a power exercised for over eight decades.
The Reason for the Proposal
The primary objective of the proposal is to reinforce workers’ rights, particularly concerning overtime compensation. The proposal aligns with the idea that after a 40-hour workweek, employees should either return home or receive higher pay for any additional hours worked. This initiative responds to concerns raised by workers who, despite working long hours, have been deprived of overtime pay due to outdated regulations. By raising the salary threshold, this proposal aims to ensure that more low-paid salaried workers receive the overtime protections they deserve, fostering economic security and fairness in the workplace.
What the Proposed Rule Includes
- Restoration of Overtime Protections for Salaried Workers who Make Under $55,068 Annually: The rule aims to restore and extend overtime protections to low-paid salaried workers. This will ensure that they receive fair compensation for hours worked over 40 hours a week, a benefit traditionally provided by labor rules.
- Additional Time for Non-Exempt Employees: By effectively identifying non-exempt executive, administrative, or professional employees, the proposed rule intends to ensure that these individuals be allowed to spend more time with their families or receive additional compensation for working over 40 weekly hours
- Enhanced Predictability: The rule proposes updating the salary threshold every three years based on current earnings data, preventing potential future erosion of overtime protections.
- Territorial Equality: It seeks to reinstate overtime protections for U.S. territories by ensuring that workers in these regions subject to the federal minimum wage enjoy the same overtime protections as other U.S. workers.
Your Opportunity to Comment
Public input is crucial in shaping this potential change. The notice of proposed rulemaking will be open for public comment for 60 days from September 8, 2023, when the Wage and Hour division posted the proposal. We encourage you to participate and share your insights, concerns, or suggestions for this proposal. Your comments can have a significant impact on the final rule.
Please click here to learn more about the proposed rule and to find instructions for submitting your comments.
We are closely monitoring this development and will keep you informed of any further updates. Your opinion matters, and your participation in the comment period can help shape the future of this regulation.
Jonathan Stender, Esq., is a partner in the Labor & Employment practice group, brings over 20 years of experience representing management and employers in workplace law. Formerly a partner at Dworken & Bernstein, Jon specialized in heavy litigation, administrative practice, and counseling clients through employment law matters and Class Actions. Beyond his legal practice, Jon is an avid Cleveland sports enthusiast and holds a soft spot for his alma mater, the Washington Huskies. For consultations or inquiries, Jon can be reached at [email protected] or (216) 573-6000 x7013.
If you have any questions or would like to connect with a Gertsburg Licata employment attorney, please contact us at (216) 573-6000 or visit www.gertsburglicata.com.
This article is meant to be utilized as an information legal update. Nothing in this article is intended to create an attorney-client relationship or provide legal advice on which you should rely without talking to your retained attorney first. You should contact a legal professional if you have questions about your particular legal situation.
