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Some employers may soon have to pad their white-collar workers’ checks with overtime pay. The White House Office of Management and Budget confirmed last week that the administration would review the U.S. Department of Labor’s proposed changes to the overtime rule under the Fair Labor Standards Act (FLSA). The suggested changes are expected to expand who’s eligible for overtime pay.
The salary threshold for overtime pay is currently $35,568, equivalent to those who make $684 per week in wages. Many expect the Department of Labor to increase the eligibility salary limit. While the Biden administration has yet to hint at that new overtime threshold, some speculate it could be upward of $80,000.
In 2021, Democrats called on the Department of Labor to raise the salary threshold to “the 55th percentile of earnings of full-time, salaried U.S. workers,” approximately $82,732 by 2026, according to HR Dive.
"With inflation being what it is, and so many states having minimum hourly wage rates that far exceed the FLSA rate, I think it is likely we will see some aggressive increases proposed by the Biden DOL," Jim Coleman, an employment attorney with Constangy, Brooks, Smith & Prophete, told the Society for HR Management in March.
Some legal experts also predict the proposal may expand the FLSA’s duties test—the guide that helps employers distinguish exempt versus nonexempt employees for overtime eligibility. That could make it harder for companies to exempt employees from overtime pay without completely retooling the nature of their jobs.
As employers wait for the Biden administration's decision, they should prepare to raise salaries or dole out a lot more overtime pay to once-exempt employees.
Amber Burton
amber.burton@fortune.com
@amberbburton
