The Department of Labor (DOL) recently announced a proposed rule that would raise the minimum salary threshold to qualify for exemption from overtime under the Fair Labor Standards Act (FLSA). Under this proposal, employees making less than $1,059 per week or $55,068 per year would be eligible for overtime pay.
The adjustment is expected to expand overtime eligibility to an estimated 3.6 million workers and is a significant increase – nearly 55% – from the current level of $35,568 per year set in 2019.
To be exempt from overtime pay under the proposal, workers will need to be paid a salary of at least $55,068 and also meet certain job duties for executive, administrative, and professional employees. Workers with a salary below $55,068 will need to be paid overtime if they work more than 40 hours a week. This threshold may be increased in the final rule based on the most recent data available, possibly up to $60,209 (equivalent to $28.95 per hour).
Small Business Impact
Employers with previously exempt employees will have to increase these workers’ salaries to this new level ($55,068/year) to keep the employees exempt or reclassify the employees as non-exempt hourly workers and pay overtime for hours worked over 40 hours a week. DOL also plans to automatically update earnings thresholds every three years.
DOL estimates that this rule will have the following Year 1 costs for small entities:
- An average total cost of $4,323 per entity, with a range of total costs of $1,833-$146,781 per entity.
- Average payroll increases of $2,638 per affected entity, with an estimated range of payroll cost increases of $768-$103,871.
- Estimated costs per small entity in selected industries include construction ($4,028), retail trade ($5,210), food services and drinking places ($9,332), and nonprofit ($3,570).
Write to DOL by November 7, 2023
NFIB will be submitting a comment letter to DOL that expresses our opposition to the proposed rule. You can read NFIB’s statement on the proposal here.
We encourage all small businesses owners concerned about the proposal to submit their own comment directly to DOL. You can read the proposed rule here and have until November 7, 2023, to submit a comment here.
For more information or to share your concerns with NFIB, please reach out to the NFIB Legal Center by emailing us at [email protected].