Department of Labor Announces Potential Change to Overtime Eligibility

On August 30, 2023 the U.S. Department of Labor announced a proposed regulatory change that would significantly impact which employees are eligible for overtime pay. Under the current rule, executive and administrative employees who earn $35,568 annually do not have to be paid time-and-a-half for overtime work. The proposed change would raise that amount $55,068 annually. This means that employers will have to begin providing overtime pay to millions of employees nationwide.

Federal regulations use multiple factors to determine if an employee is exempt from overtime pay, including salary, job duties, and type of profession. Employees whose primary duties include managing an enterprise or department and directing the work or at least two other employees, and have input on hiring and firing decisions, may fall under the “executive exemption”. Employees whose primary job duties are the performance of office work directly related to the management or general business operations of the employer or customers and can exercise discretion and independent judgment with respect to matters of significance may fall under the “administrative exemption”. For both exemptions, employees must also earn more than a certain amount in salary to be exempt. Under the proposed rule, that salary will have to be much higher if an employer wants to avoid paying overtime.

The rule is open to public comment and is not expected to come into force until 2024. Even then, businesses are likely to file lawsuits challenging the rule; a federal judge blocked a similar rule change in 2016. Still, employers should begin preparing for the new rule now by reviewing the job duties of their employees to see who may be affected and revising their overtime policies if needed.

Taking these steps now can avoid a wage dispute in the future. The attorneys at Smith Jadin Johnson are available to assist with any changes that are needed.