A proposed rule by the U.S. Department of Labor (DOL) seeks to raise the current salary threshold for overtime exemptions from $35,568 to $55,068 annually. Should the change be enacted, the move will mark a 55% increase in the annual earnings threshold, extending guaranteed overtime pay to around 3.6 million salaried workers, including those in the commercial glass, glazing and metal industries.
As a result, all employees earning less than $1,059 per week would be entitled to overtime pay, regardless of job title and duties.
The overtime changes coincide with an update to the Davis-Bacon Act, which seeks to raise wages for construction and subcontractor workers, including glaziers. While controversial, some companies welcomed the news, including Giroux Glass. CEO and president Nataline Lomedico said the update “further emphasizes the importance of fair compensation and quality workmanship.”
A Win for Workers
According to law firm Burr & Forman, DOL’s proposed rule raises the salary threshold to the 35th percentile of average weekly earnings of full-time salaried workers in the southern U.S. Census Region, which currently marks the lowest for wages. The rule would also change exemptions by raising the maximum salary for those classified as “highly compensated employees” from $107,432 to $143,988—the latter of which marks the 85th percentile of full-time salaried workers nationally.
“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,” suggest DOL officials.
Federal overtime provisions are part of the Fair Labor Standards Act. The Act requires employees to receive overtime pay for hours worked over 40 in a workweek “at a rate not less than time and one-half their regular rates of pay.” According to the Act, there is no limit on the number of hours employees aged 16 and older may work in any given work week.
Officials say a salary level test has been part of the regulations process since 1938 and “has been long recognized that the best single test of the employer’s good faith in attributing to the employee’s services is the amount they pay for those services.”
Some salaried employees work alongside those earning hourly wages, often contributing more than 40 hours a week, say officials. They add that “outdated and out-of-sync rules” prevent those same salaried workers from earning overtime pay. They suggested that the proposed salary level would help ensure that salaried workers receive overtime protections traditionally provided by the department’s rules.
How Legal Experts Say You Should Prepare
Legal challenges to the DOL’s proposed rule are expected. A similar proposal from the Obama Administration, seeking to raise the annual salary threshold from $23,660 to $47,476, was blocked by a federal court in Texas. Nonetheless, with a final rule months away, “employers should review their current pay practices to prepare for possible changes,” advise experts at Burr & Forman.
Key suggestions include:
- Review current position classifications and pay scales to determine how many currently exempt employees earn between the $35,568 and $55,068 thresholds to estimate the potential cost of increasing their pay;
- For exempt positions earning below the $55,068 annual threshold, track and analyze the number of hours worked per week to establish the potential cost of converting them to non-exempt, hourly workers;
- Be aware that many employees view salaries as a more prestigious form of pay than hourly wages and may view a change to hourly as a demotion. Formerly salaried employees may also resent clocking in and out to track hours; and
- Ensure company policies are current, especially those related to proper timekeeping, approval of overtime, use of company equipment or personal devices to conduct business during non-work hours, meal and rest breaks, and remote work.
A 60-day comment period closes at 11:59 p.m. (ET) on Nov. 7, 2023. Comments can be filed electronically through the Federal eRulemaking Portal, or mailed to the Division of Regulations, Legislation and Interpretation, Wage and Hour Division, U.S. Department of Labor, Room S-3502, 200 Constitution Avenue NW, Washington, D.C., 20210.
Comments should be identified by Regulatory Information Number (RIN) 1235–AA39.