NEWS & INSIGHTS

Here we go again: DOL proposes new federal minimum salary threshold for OT pay

Just a few years removed from legal and political battles concerning the federal minimum salary threshold for overtime pay, the U.S. Department of Labor’s Wage and Hour Division has once again proposed to raise the minimum threshold.

The department has now proposed the new minimum threshold at $55,068 – or about $1,059 per week – which is a hike of about 55% from the current rate. The proposed rule would guarantee overtime pay for most salaried workers who earn less than those totals in the United States.

The department is also proposing raising the salary level for the Highly Compensated Employee Exemption to $143,988, a more than 34% increase from the current level of $107,432. Under the new proposal, anyone that makes less than the $143,988 in total compensation would be eligible for overtime pay. (Although remember, PA does not recognize the Highly Compensated Exemption.)

According to the department, the new minimum would guarantee overtime pay for an additional 3.6 million workers in the U.S. However, it will cause employers to pay more workers mandatory overtime pay. The U.S. Chamber of Commerce Vice President Marc Freedman called the overtime threshold regulation increase “the wrong rulemaking at the wrong time,” and said that it will hurt “small businesses, nonprofits” and others.

Again?

If this seems familiar to employers, it should. The Obama administration initially proposed more than doubling the minimum salary threshold from $23,360 per year to $47,476 per year in 2016. While that figure was approved, it was later thrown out in legal battles across the country.

When the $47,476 figure was defeated in 2017, the Trump administration proposed and was able to pass a minimum salary threshold of $35,568 per year, where it has stood since 2019.

Meanwhile, in Pennsylvania …

A similar (but politically different) battle raged for the minimum salary threshold for overtime pay in Pennsylvania during Gov. Tom Wolf’s time in office. Ultimately, Wolf’s efforts to raise the minimum salary threshold failed – or more accurately, were compromised in budget negotiations – and Pennsylvania was left without its own threshold.

New employers may find this confusing, but the majority of employers just dealt with this headache within the last 10 years and the protocol shouldn’t change this time around. Employers should audit their payroll to determine the salary for each employee and decide whether it makes more financial sense to bump the amount of an employee’s weekly or yearly salary pay in excess of the minimum salary threshold to preserve the overtime exemption (or be prepared to do so when a change may be required), or whether the more prudent course is to continue having that employee under the threshold and eligible for overtime.

If you have questions on how another new minimum salary threshold for guaranteed overtime will affect their business, please contact me or any member of the Saxton & Stump Labor and Employment Group.