The US Department of Labor (DOL) recently received more than 26,000 comments regarding its proposal to extend overtime pay protection to a larger number of workers. This intense feedback offers a preview of the expected legal battle looming on the horizon.
As per the Fair Labor Standards Act, employees who are paid on a salary basis, earn above a certain amount annually, and perform executive, administrative, or professional functions are exempt from receiving overtime pay. However, the Biden administration introduced a rule in August aimed at modifying this salary level to approximately $55,000 per annum. This change would potentially extend overtime eligibility to millions more workers. This salary threshold would then undergo updates every three years to account for alterations in the labor market.
Not surprisingly, this proposed transformation has met strong opposition from business groups, who assert that it would inflate payroll expenses for employers and pose a stark threat, particularly to small businesses. Echoing the previous Obama overtime rule from 2016 that was subsequently struck down in court, these legal contentions might feel all too familiar, as suggested by Libby Henninger, a shareholder at Littler Mendelson PC.
An interesting deviation in this proposal, however, is the plan to also increase the overtime exemption salary threshold in the US territories of Puerto Rico, Guam, and the US Virgin Islands. These regions haven’t witnessed changes to the overtime rule since 2004. Henninger predicts that some of the legal disputes might concentrate on this aspect of the proposal, considering the economic conditions in these areas and the substantial financial strain this would require them to absorb in a short time.
While the Society for Human Resource Management endorses efforts to update the overtime exemption salary threshold, it voiced concerns about the proposed $55,000 salary level and the annual increments. The organization issued a comment letter on Nov. 7 advocating for a mechanism to ensure the salary level remains a meaningful standard but argued it should not compromise the opportunity for the regulated community to provide feedback.
On the other hand, the National Employment Law Project emphasizes that the proposal is not just within the department’s authority, but also needed to help the regulated community comply with the law. A group of 19 Senate Democrats, who are in favor of these changes, asserted in a letter to the DOL on Nov. 7 that businesses would be better prepared for changes to the overtime exemption threshold if the level automatically updated every three years as proposed by the Biden administration.
In their support for the proposal, some proponents also labelled the Trump-era rule as notably inadequate. They cited an analysis from The Economic Policy Institute, which estimates that the current salary threshold of $35,568 only encompasses 15% of the full-time salaried workforce.
The DOL now embarks on the lengthy task of appraising these comments before it can commence drafting its final rule.