In 2014, the Administration began an effort to update the rules surrounding federal wage and hour standards. As part of that effort, the Department of Labor (DOL) released a proposal that would more than double the salary threshold under which employees qualify for overtime pay and make significant changes in the relevant exemptions.
The rule would increase the federal overtime pay threshold in the Fair Labor Standards Act (FLSA) from $23,660 to $50,440, a 113% increase. Any employee earning a salary below this threshold and whose duties are not consistent with the positions defined in the exemptions provided by DOL must be treated as nonexempt and be paid or any overtime hours worked at a rate of one and a half times their normal hourly rate.
Concerns have also been raised that the DOL’s proposed rule will result in workers having less flexibility and opportunity for advancement in the workplace. Watch this video from Partnership to Protect Workplace Opportunity to learn more on the unintended consequences of this proposed overtime rule and who will be affected.
Impact on Your Business
If this rule goes into effect, employees, such as branch office support staff or home office operations staff, making under $50,440 that do not fall under any of the relevant exemptions will be required to be paid hourly and paid time and half for any overtime worked. The proposal will raise costs on small businesses, like those run by financial advisors, while doing nothing to streamline a complex and outdated maze of overtime rules.
If you currently have exempt employees that earn between $23,660 and $50,440 annually, it is important to understand the financial impact based on the DOL FLSA proposed rule. ADP has provided an Overtime Cost Calculator tool to provide estimates to assess the impact of this problematic rule on your business. Access the calculator here.
Protecting Workplace Advancement and Opportunity Act
The overtime rule change has been met with widespread opposition from a variety of industries. The Protecting Workplace Advancement and Opportunity Act, S.2707/H.R. 4773, was introduced by Sen. Tim Scott (R-SC) and Rep. Tim Walberg (R-MI) and cosponsored by Sen. Lamar Alexander (R-TN) and Rep. John Kline (R-MN) to ensure the DOL pursues a balanced and responsible approach to updating federal overtime rules2.
This legislation will:
- Prevent DOL from finalizing a proposal that will limit opportunities for employees and place significant burdens on job creators;
- Require DOL to fully and accurately consider the economic impact of any rule on small businesses, nonprofits, institutions of higher education, and others who will be affected;
- Ensure future changes to the salary threshold accurately reflect the economic realities facing workers and employers by making it clear that automatic increases are not allowed under current law; and
- Promote transparency and accountability by requiring any changes to the relevant exemptions be made available for public review and comment.
In anticipation of the publication of the release of the final Overtime Rule, FSI is working with the Partnership to Protect Workplace Opportunity to protect workplace flexibility and opportunities. If you have any questions regarding the Overtime Pay Rule, please contact FSI’s Advocacy Team at firstname.lastname@example.org.