The United States Department of Labor recently announced proposed significant updates to overtime pay regulations. These updates reflect the current administration’s commitment to providing economic security and overtime protections to workers who make under $55,000 per year. These updates, developed after meetings with employers and workers, could impact over 3 million individuals. In sum, these proposed updates include a few notable developments.
First, the proposed updates would increase the Federal Labor Standards Act (FLSA) standard salary level for overtime exemptions from the current rate of $684 per week to $1,059 per week. This would result in an increase in the yearly salary level from $35,568 per year to $55,068 per year.
Additionally, the Department of Labor plans to update the highly compensated employee (HCE) total annual compensation. This would increase the threshold to match that of the 85th percentile of full-time salaried workers nationally, $143,988 up from the current rate of $107,432.
To keep pace with the changing labor landscape and need for regular updates to earning thresholds, the Department of Labor proposed switching to automatic updates for standard salary levels and HCE compensation. The Department noted the challenges and concerns brought on by lengthy intervals between wage updates, causing outdated earnings thresholds, and the resulting significant impact on employees. Under the proposal, the automatic updates would take place automatically every three years.
If the proposal is adopted, this will likely cause a rise in employment costs beginning in 2025 and continuing in the succeeding years. The proposed updates have been released to the public and will be available for public comment until November 7, 2023.
