We send our colleagues and clients a “client alert” each month on a topical change impacting HR policy. While we sent a client alert just a week ago, we have received a number of inquiries regarding the proposed increase by the Labor Department in the overtime threshold.  Under the Fair Labor Standards Act, “covered employees” must be paid time-and-a-half when they work more than 40 hours per week.  However, workers are exempt from this mandate if they work “in a bona fide executive, administrative or professional capacity.”  The Labor Department has proposed a new rule that would increase the level at which salaried workers are considered exempt from overtime pay to $1,059 per week or $55,068 annually (current threshold is $684/wk. and $35,568 annually) . Under this proposal, the threshold would also be indexed for inflation.   

Our clients are rightfully concerned this increase in the threshold will increase labor costs.  The rule proposal, if enacted, would also prompt employers to reclassify more than a million and a half currently exempt workers to nonexempt status and raise pay for others above the proposed new threshold.  The increase labor costs could be devastating to some employers and there is concern across commerce about this proposed change.  That said, the Courts struck down the last proposed change by the Labor Department during the Obama Administration because any change to the Fair Labor Standards Act must be by Congress not the Labor Department and we expect the same fight will ensue any attempted enactment of the proposed rule change.  We will continue to monitor the proposal to the FLSA and keep you posted.