The Department of Labor (DOL) has introduced a new proposal aimed at extending overtime eligibility to approximately 3.6 million workers. This rule would require employers to provide overtime pay to salaried workers earning less than $55,000 per year. This is a significant increase from the current threshold of $35,568. Workers view this move as a positive development, but it could potentially burden businesses.
Why it matters: This new proposal grants overtime protection to a much larger portion of the workforce, which employees see as a victory. However, businesses may face substantial challenges in adjusting to this new rule. The potential economic impact of this proposal could cost businesses up to $664 million over the next 10 years.
- The Fair Labor Standards Act requires companies to provide overtime pay to hourly employees who work 40+ hours a week. It does not require the same for salaried workers who hold higher positions. However, this new proposal has the potential to change that.
- To avoid paying overtime, employers may need to consider raising employees’ salaries or reclassifying their workers, which could lead to increased operational costs.
- Historically, there have been previous threshold increases, with the most recent occurring in 2019, bringing it to $35,568. Three years prior to that, during the Obama administration, there was an attempt to raise it significantly to $47,476. These fluctuations indicate the uncertainty surrounding the current proposal’s fate.
- Jason Reisman, a partner at a prominent Philadelphia-based law firm specializing in labor and employment matters, voices concerns to employers. He advises them against prematurely adopting these new practices until they receive official legal validation. If employers alter their policies prematurely and the proposal ultimately fails to materialize, they may have unnecessary expenses.
Go Deeper —> Proposed Overtime Rule Could Cost Businesses Up to $664 Million – Inc.
