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Dive Summary:
- The U.S. Department of Labor announced Tuesday that it will publish a final rule that will raise the Fair Labor Standards Act’s annual wage floor for overtime pay eligibility in a two-step process. Effective July 1, the threshold will increase from $35,568 to $43,888 per year. It will then increase to $58,656 on January 1, 2025.
- The changes will expand overtime pay eligibility to millions of U.S. workers, the agency said. The DOL’s 2025 cap represents a roughly 65% jump from the Trump administration’s 2019 rule and is slightly higher than $55,068 mark proposed by the DOL in 2023.
- The threshold would be automatically updated every three years using current wage data — which would then appear on July 1, 2027 — but the DOL said in the proposed rule that updates may be temporarily delayed if the department chooses to participate in the rulemaking to change its methodology or reporting mechanism.
Dive Insight:
The rule represents yet another regulatory update for employers, following the DOL’s independent contractor final rule and the US Equal Employment Opportunity Commission pregnancy accommodation rule. The overtime rule the White House review was approved However, weeks ago, and a source told sister publication HR Dive at the time that its publication was expected at any time.
The FLSA’s overtime exemption applies to employees employed as bona fide executive, administrative, professional, and outside sales employees, as well as certain computer employees.
The first part of the increase scheduled for July 1 follows the process for salary cap increases established by the 2019 rule, Jessica Looman, administrator of the DOL’s Wage and Hour Division, said during a news conference Tuesday . This methodology is based on the 20th percentile of weekly earnings of full-time wage earners in the lowest-wage U.S. Census tract, while the January 2025 increase uses an updated methodology based on the 35th percentile.
The first increase in July 2024 is expected to affect about 1 million workers, Looman said, while the second increase in January 2025 is expected to affect about 3 million workers.
A separate overtime exemption applies to certain highly paid employees. For those employees, the DOL rule will raise the minimum wage to $132,964 on July 1 and to $151,164 on Jan. 1, 2025, Patrick Oakford, deputy assistant secretary for policy at the DOL, said during the news conference. .
In all, the department said it reviewed more than 33,000 public comments on the proposed rule. One of these came from the Society for Human Resource Management, which asked the organization delay the effective date of the final rule to 2025. SHRM said a 60-day period between publication and the effective date is insufficient for employers to evaluate and comply with the rule.
“This rule will restore the promise to workers that if you work more than 40 hours a week, you should be paid more for that time,” Deputy Labor Secretary Julie Sue said in a news release. “Too often, low-wage workers do the same work as their hourly counterparts, but spend more time away from their families for no extra pay. This is unacceptable”.
Observers are now turning to the federal courts, where challenges to the rule are expected. In September, a judge for the U.S. District Court for the Western District of Texas rejected an attempt to repeal the 2019 rule, where an employer claimed the DOL did not have the statutory authority to issue it.
The legal battle too may be referred to Congress, where a Republican representative from Missouri introduced a bill that would block the new final rule. The bill has yet to be voted on in committee.
Meanwhile, attorneys on the employer side who previously spoke to sister publication HR Dive said employers can determine which positions will be affected from the updated cap and whether to convert affected employees to hourly, non-exempt status and pay overtime or increase wages to exceed the cap.