On August 30, the U.S. Department of Labor (DOL) published its proposed overtime regulations that specify that most employees earning less than $55,068 per year would be entitled to overtime compensation, regardless of whether they are currently classified as executive, administrative, or professional (white-collar) workers. DOL is accepting public comments on these proposed regulations through November 7, 2023.
Nonprofits employ nearly 10% of the private workforce, and many are likely to be affected by the new rules. Here is a brief summary of what is included in this proposed regulation:
- Increase in the Salary Threshold for Certain Exemptions
Under the current executive, administrative, or professional (EAP) exemption, an employee must generally be paid on a salary basis, primarily perform executive, administrative, or professional duties, and be paid at least $684/week (which is equivalent to $35,568 annually). The proposed new rule would significantly increase the weekly salary threshold to $1,059/week ($55,068 annually) for executive, administrative, and professional employees to be exempt from overtime. This means current exempt employees who make less than $55,068 annually would become eligible for overtime.
2. Increase in the Annual Salary Level for Employees to Qualify for the Highly Compensated Exemption
The rule also proposes an increase in the salary level required for employees to qualify for the highly compensated employee (HCE) exemption. Under the proposed rule, employees will have to earn at least $143,988 annually to qualify for the exemption (up from the current annual threshold of $107,432).
3. Automatic Increases Every Three Years
Under the proposed rule, the EAP salary threshold and the HCE total compensation requirement would automatically increase every three years to reflect current earnings data. The EAP would be adjusted to remain at the 35th percentile of weekly earnings of full-time non-hourly workers in the lowest-wage census region (currently the South). The HCE total annual compensation requirement would remain at the annualized weekly earnings of the 85th percentile of full-time non-hourly workers nationally. The DOL proposes to publish a notice with the new earnings levels at least 150 days before the effective date of the update. In the event of unforeseen economic or other conditions, however, the DOL would retain the discretion to delay a scheduled automatic update.
4. No Changes to the Duties Test for the Exemptions
For an employee to qualify for one of the exemptions under the Fair Labor Standards Act (FLSA), the employee must satisfy a salary test and a job duties test. The job duties test examines whether the employee’s actual job functions meet the requirements of the applicable exemption. Under the proposed rule, there are no changes to the duties test.
5. Adjustments to the Current Salary Thresholds Applicable to U.S. Territories
The DOL proposes to apply the $1,059 weekly EAP salary threshold to employees in Puerto Rico, Guam, the U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands, where the federal minimum wage is applicable. The DOL would set a special salary threshold for employees in American Samoa equal to 84% of the standard salary level until 90 days after the minimum wage for American Samoa equals the federal minimum wage. Thereafter, the full $1,059 weekly EAP salary threshold would apply.