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April 2023: Congress Raise Exempt Salary Threshold New Overtime Rule Proposal

27 Apr

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Update Applicable to:
All employers.

What happened?
On March 29, 2023, U.S. Senator Sherrod Brown (D-OH) introduced the ”Restoring Overtime Pay Act of 2023”, which makes millions of American workers eligible for overtime pay when they work more than 40 hours a week, ensuring that when workers put in extra hours, they get the extra pay they’ve earned.

What are the details?
The salary threshold for exempt employees is $684 a week ($35,568 annualized). Still, the DOL’s pending proposal is expected to raise the rate to around $900-$1,000 a week (which works out to be $46,800 to $52,000 when annualized). This jump will require some planning if employers have exempt employees who earn less than the anticipated proposal. Moreover, the proposal could include automatic, periodic increases to the salary threshold based on market data, which would cause the rate to go up even more substantially in future years.

Beyond the Salary Threshold
Although the DOL’s Statement of Regulatory Priorities only mentions the salary level test, the agency might push for additional changes, such as:

  • Adjustments to the exempt duties tests
  • An additional rate increase for highly compensated employees. Currently, “highly compensated employees” who earn at least $107,432 are subject to a reduced duties test.

These potential changes would create additional steps for employers when it comes to reviewing their employees’ job duties and determining whether they are still exempt from overtime pay.

According to the latest regulatory agenda, the department expects to issue the proposed rule in May, but it should be noted that the proposal has already been delayed several times.

Perhaps the rule has been delayed due to concerns about inflation and how the change would impact small and mid-size businesses, or perhaps the administrative process is taking longer than the agency initially anticipated. But we expect officials to move quickly through the notice and comment period once the proposed rule is published, making it essential for you to plan for possible changes.

For more information, please see the links below:

Restoring Overtime Pay Act of 2023

Article

What do employers need to do?
Employers should review the links provided above and their employee compensation data to determine which exempt employees earn between $684 and $1,000 a week and may be impacted. Once the rate is announced, you must decide whether to increase the affected employees’ salary to the new level or convert them from exempt to non-exempt.

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This communication is intended solely for the purpose of conveying information. The present post might incorporate hyperlinks directing readers to websites managed by third-party entities. The inclusion of any links within this communication is meant to serve as points of reference and could encompass opinion articles from various law firms, articles from HR associations, official websites, news releases, and documents of government agencies, and other relevant third-party sources. Vensure has no authority over these external websites and bears no responsibility for their content. Furthermore, Vensure does not endorse the materials present on these websites. The contents of this communication should not be interpreted as legal advice or as a legal standpoint concerning specific facts or scenarios. Nor should it be deemed an exhaustive compilation of facts potentially pertinent to federal, state, or local laws. It is strongly advised that employers solicit legal guidance from an employment attorney when undertaking actions in response to any legal updates provided. This is due to the possibility of future alterations occurring in federal, state, and local laws, regulations, as well as the directives and guidelines issued by governing agencies. These changes may transpire at any given time, potentially rendering certain portions of the content within this update void or inaccurate.

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