What proposed change in overtime salary threshold means for employers

September 1, 2023

A proposed rule change put forth this week could update overtime pay rules for U.S. workers.

Wednesday, the U.S. Department of Labor unveiled a plan to raise the threshold for which workers are entitled to receive overtime pay.

Under the current rule, employers may exempt certain employees from receiving overtime pay (time and a half for any hours worked above 40 per week) by classifying them as managers or exempt employees. However, only employees earning less than $35,568 annually can be exempt. Employers are required to pay standard time and a half overtime to employees earning an annual salary greater than $35,568.

The Biden Administration now proposes raising that threshold salary to $55,000, opening the door for an estimated 3.6 million workers to collect overtime pay. However, any change in the law is months away from implementation. The proposal will have to survive a regulatory review as well as a 60-day public comment period and could face court challenges.

Under the proposed changes, the salary threshold would also be updated every three years going forward, with adjustments made based upon a review of the current income data.

An employer found to have misclassified an employee can face, at a minimum, repayment of back wages and civil penalties up to $1,000 per misclassified employee. In certain circumstances, there are criminal penalties that can include fines of up to $10,000 per misclassified employee and even jail time.

If you are an employer with questions about the current rules, or potential changes, give myself or any member of our Labor and Employment team a call today.

Click here to read the full statement from the Department of Labor.

Kevin Burke counsels employers on recent developments in employment law, and the implementation of policies and procedures which enable employers to be in compliance with federal and state laws. He can be reached at 716-854-4300 ext. 292 or [email protected]