What You Should Know About the DOL Proposed Overtime Rule

By Trent Cotney

Does your company employ exempt workers who earn less than $60,000 a year? If so, the U.S. Department of Labor (DOL) is proposing a new overtime rule that could impact you and your employees.

Details of the new rule

As you likely know, nonexempt employees are eligible to receive overtime pay, while exempt employees are not. Employees can be classified exempt if they earn a salary, make at least $684 per week (or $35,568 a year), and perform specific professional job duties (usually administrative or executive). Highly compensated employees can be categorized as exempt if they earn $107,432 or more each year.

If the proposed rule becomes final, these changes would go into effect:

  • The salary threshold would increase from $684 a week ($35,568 a year) to $1,059 a week ($55,068 a year). 
  • The salary threshold would increase from $107,432 a year to $143,988 for highly compensated employees. 
  • Automatic increases would be implemented every three years, affecting all salary thresholds.

It is interesting to note that the $ 1,059-a-week benchmark reflects only the 35th percentile of full-time salaried workers’ weekly earnings in the lowest-wage census region (primarily the South). In contrast, the increase for highly compensated workers reflects the 85th percentile of full-time salaried workers’ earnings nationally.

According to the DOL, if the rule is finalized and enacted, overtime eligibility would be extended to some 3.6 million more employees, in keeping with the Fair Labor Standards Act (FLSA).

What the rule would mean for employers

The proposed rule could have a major impact on companies of all sizes. It could potentially increase labor costs dramatically for many employers, especially those in retail, service industries and education. In reaction, some employers may opt to increase their workers’ salaries just above $55,000 so they can retain their exempt status and not be paid overtime. 

The salary threshold for the final rule will likely be based on 2023 wages since those will be the most recent data. However, there could be enough opposition that 2022 wages will be used instead. In addition, the threshold could be higher than the estimated $55,068 and perhaps be closer to $60,000. 

Employers should know, however, that the duties test used to exempt professional positions would not change much under the new rule. In addition, the proposed rule will not alter the 10 percent allowance of nondiscretionary incentives and bonuses to be included in the minimum salaries.

Final advice

If the proposed rule is confirmed, it will likely go into effect later next year, and employers will have a grace period in which to comply. However, this change could be a huge hit for many companies’ payroll budgets.

The rule will probably face legal challenges surrounding the new threshold and the automatic increases. However, as we see how things play out, we should all be prepared for the change.

The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.


Trent Cotney is a partner and Construction Practice Group Leader at the law firm of Adams and Reese LLP and RCAW General Counsel. You can contact him at trent.cotney@arlaw.com or call 866.303.5868.

0 Comments

Submit a Comment

Your email address will not be published. Required fields are marked *