Changes in DOL Overtime Compensation Spell Changes for Employers and Employee Overtime Protections

The U.S. Department of Labor has announced new proposed overtime protections that would extend overtime compensation to 3.6 million salaried workers. The proposed rule would guarantee overtime wages for most salaried workers earning less than $1,059 per week, or $55,000 a year. Three things about this change are important to understand:

  • This is a big increase. Since 2020, the salary threshold has been $684 per week or $35,568 annually;
  • The new salary threshold would be updated every three years to remain current with new wage data. The updates would be automatic and would not require further rulemaking; and
  • The changes are nearly certain to be challenged, particularly in the Fifth Circuit.

If approved as is, the new rule will take effect in mid-2024, when the $55,000 per year threshold will likely have been indexed to roughly $60,000. The public comment period for the proposed rule closes at the end of 2023. Worker classification is a critical aspect for employers who should review these details now before the new rule goes into effect.

Employee Classification May Stymie Overtime Protection

Everybody knows an A.J. He was a great guy and a valuable employee. He could do everything – run the cash register, change out the fryer oil, and flip burgers like a machine during rush hours. He put in all the extra shifts he could, especially after the baby came. No one deserved it more when they made him a manager. In addition to going to occasional manager meetings, he still manned the mop, ran the register, and stayed late to close at night. Worse yet, his new salary came to less than his old wages plus overtime. At work, he was exhausted and mean. Eventually his girlfriend left and took the baby. He quit. Then he disappeared. Nobody knows what happened next. So much for the success story. This scenario could have been avoided.

For the employee above, what happened to that worker was a shame, a dirty shame. What he paid was not the price of success. It was the cost of exploitation. This does not have to happen to someone else. Know that you are not alone and that we are here to help.

Understanding Employee Rights With Kilgore & Kilgore

If you have worker classification or overtime compensation law questions about wages, hours, overtime compensation, tips, independent contractor status, and other issues, reach out to us. Contact us using this link Contact Kilgore Law or call us at 214.969.9099. Click on this link to find out about our Wage and Hour Law Practice.

Now is the time to get the conversation started. Our Texas employment lawyers can help you, whether you are an employee with questions about worker classification or overtime compensation, or whether you are an HR manager with questions about how to prepare for possible employment issues with the new proposed changes.

The FLSA (Fair Labor Standards Act) and Overtime Wages

The FLSA requires that covered nonexempt employees must receive overtime compensation for hours worked over 40 per workweek at a rate not less than one and one-half times the regular rate of pay. But a lot is buried in that sentence. The new proposed rules get at the tricky question of who is an exempt employee.

Who is an Exempt Employee Without Overtime Protections?

The language of the new proposed law is convoluted. For employees, exempt from the law means not protected rather than free from. It is the employer who is free from the burden of calculating and paying overtime wages. FLSA Section 13(a)(1) takes minimum wage and overtime pay protections away from executive, administrative, and professional workers (referred to EAP employees), presumably on the theory that they can negotiate decent salaries. For high-rollers in executive and C-Suite positions, this may be true, but that is just a fiction for workers on the first rungs of the prosperity ladder.

To be considered an EAP employee, a worker must make more than a certain amount AND primarily perform executive, administrative, or professional duties as provided under the DOL’s duties test. The duties test is very fact-specific, troublesome standard on its own, and not at issue here. The bright-line dollar part of the test, on the other hand, will certainly draw fire.

Department of Labor History

In 2016, the DOL proposed a rule to nearly double the salary threshold for EAP employees from $455 to $913 per week. That rule was challenged shortly after its publication, and a federal judge in Texas blocked it from going into effect on the theory that the increase was too drastic. A lawsuit ultimately made its way to the Fifth Circuit. The DOL blinked and withdrew that 2016 proposal. The 2020 increase in the salary threshold, which is currently in effect, was far more modest. With this new 2023 proposal, the DOL is wading back into the fray.

The new limits of $1,059 per week, or $55,000 a year, are no sure thing. On the other hand, if they do become effective, mid-2024 is not so far away.

Lurking in the future, it is possible that the U.S. Supreme Court will limit what is known as the “Chevron doctrine”. Named after that Court’s landmark 1984 decision in a case known as Chevron U.S.A. v. Natural Resources Defense Council, the Chevron doctrine is the name of the rule that courts should defer to a federal agency’s interpretation of an ambiguous statute if that interpretation is reasonable.

The case to watch in the U. S. Supreme Court’s 2023 term is Loper Bright Enterprises v. Raimondo. The Loper case focuses on the ability of the Commerce Department to regulate commercial fisheries. A broad ruling, however, could also affect the DOL’s ability to implement wage and hour law. The smart money is on a late June 2024 decision, just about the same time that the DOL’s new rule might take effect.

Preparing for DOL Wage Changes and Overtime Protections

Now is the time for employers to do a sober self-audit to address the following questions:

  • Considering both the salary threshold and the duties test, are workers properly classified as hourly wage earners or salaried employees?
  • Assuming the salary threshold will ultimately go up by at least some fraction of the proposed amounts, what financial measures do you need to take? Are raises in the offing?
  • Revisit policies on use of company equipment and hours worked. Are workers required to be on call, even when not at work? Are you requiring workers to do company work during rest and meal breaks?
  • Is your timekeeping system adequate to handle those breaks?
  • How is employee morale, really? A pay dispute can cost you some of your best and most productive workers.

Reach out to Kilgore & Kilgore Employment Lawyers for Legal Help

Our Texas employment lawyers have decades of experience with wage and hour, overtime compensation, employee rights, and other wage and hour law claims. We are well prepared to handle the new changes coming soon to our clients. Use this link to get started Contact Us.

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