US Department of Labor proposes new overtime eligibility rules

The U.S. Department of Labor, under the direction of the Biden administration, has announced proposed changes to the overtime eligibility rules under the Fair Labor Standards Act. Having déjà vu? Us too. Similar legislation was proposed by the Obama Administration in 2015, but was blocked by a federal judge in Texas, and was ultimately killed entirely during the early days of the Trump administration.

Under the proposal, workers making less than $55,068 would automatically be entitled to time-and-a-half pay (the current threshold is $35,568). That’s an increase of more than 50%.

The proposal also includes mechanisms that would update the salary threshold every three years by linking it to the 35^th percentile of income. This increase would almost guarantee that the salary threshold is unattainable in just a few years.

In 2015, we heard from employees across the Upstate that they enjoyed their exempt status, and didn’t want to “punch the clock,” given the little flexibility that allowed them to enjoy. Given the flexibility of working arrangements in the post-COVID world, that message rings even more true than before. With our current inflation challenges, employers simply cannot increase salaries by more than 50% to bring employees to a non-exempt status, meaning folks who have enjoyed an exempt “salaried” schedule will become hourly employees, with a much less flexible schedule. That will jeopardize the ability of many individuals to work remotely.

Businesses are already struggling to pay and retain employees, while continuing to hold down prices for consumers and customers and are already paying significantly higher wages as a result. Increasing the cost of labor will continue to hurt our business community, especially small businesses and nonprofits who are already operating on thin margins.

As pointed out by the U.S. Chamber of Commerce, the Department of Labor’s regulation includes a FOOTNOTE that the Department of Labor intends to use the latest data when implementing the final regulation and projects the threshold to go as high as $60,000 by that time.

Last but most certainly not least, we mentioned the court decision in 2015 in our opening paragraph. While we certainly expect this regulation to be challenged by the courts, the proposed regulation also includes a severability clause, that allows parts of the regulation to be challenged, while keeping other portions of the regulation in effect. The 2015 regulation, which also included an automatic escalation clause, was shot down because of the automatic escalation portion of the regulation. The inclusion of this severability clause indicates that should the same logic apply to this iteration of the regulation, the time-and-a-half pay threshold will be enacted anyway.

Public Commentary for the proposed regulation is OPEN NOW and will remain open until November 7^th. Following the public commentary period, the Department of Labor will review commentary, and publish final rules, that should become effective 60 days after publication.

We strongly urge our members to weigh in on the public commentary and let the federal government know how detrimental this will be to your operating costs and ability to retain and hire workers and remain in business.