Coming in Spring: FLSA income thresholds changes

While the official start of winter is close at hand, the U.S. Department of Labor is looking forward to Spring. On December 6, the U.S. Department of Labor (DOL) released its agenda, which lists regulatory changes the agency is looking to address. Included on that list is a final rule that would change how employers determine which workers may be denied overtime pay (be exempt).

This issue is not new, but remains on the DOL’s (and employers’) radar.

Salary level

Final rules for increasing the salary level are expected in April 2024. The final rule would also increase the highly compensated employee level.

Under the FLSA, employers may consider executive, administrative, and professional employees exempt from the overtime requirements if employees:

• Are paid on a salary basis,
• Are paid at least a certain salary level, and
• Perform certain duties.

The proposed rules increase the salary level from $684 per week ($35,568 per year) to $1,059 per week ($55,068 per year).

Highly compensated employees

Employers may also consider highly compensated employees (HCEs) as exempt from overtime. The proposed rule increases the salary threshold for HCEs from $107,432 to $143,988 per year.

Impact of the changes

If the rules are finalized as proposed, many more employees will be eligible to receive overtime at the rate of 1.5 times their hourly wage for any hours worked over 40 in a workweek. The DOL estimates that total direct employer costs in the first year would be $1.2 billion.

The final rules are also expected to include provisions to update these levels more frequently.

Key to remember: Employers can look forward to final rules changing the criteria to determine whether an employee must be paid overtime or not.