Time For the Facts

In general, under the Fair Labor Standards Act (FLSA), a person must satisfy three criteria to qualify as exempt from federal overtime pay requirements: first, they must make a salary; second, that salary must be more than $684/week ($35,568 annually); and third, their “primary duty” must be consistent with those common to managerial, professional or administrative positions.

In December 2021, DOL announced its plans to update the overtime regulations, specifically highlighting its desire to increase the minimum salary threshold. PPWO is calling on DOL to hold stakeholder meetings before developing or issuing its proposal, so the employer community can provide the agency with input on the practical implications new, overly burdensome overtime regulations will have on the economy and workers.

Depending on the magnitude of the increase proposed by DOL, these new overtime regulations could hurt small businesses, workers, and the economy as a whole.

  • Many employees will be reclassified from salaried to hourly workers and experience reduced opportunity and flexibility in the workplace;
  • Employers will face crushing increases in labor and administrative costs;
  • Costs will increase for organizations operating on fixed budgets, forcing them to cut critical programming, staffing, and services;
  • Businesses will suffer with low employee morale; and
  • The American people will see more increases in prices for goods and services as well as diminished customer service.

In an economy that is just beginning to recover from the COVID-19 pandemic, these consequences will be devastating.

The last update to the overtime regulations was completed in September 2019, when the Trump administration proposed a reasonable increase to the minimum salary threshold. The Trump-era DOL was forced to act after the Obama administration had proposed and finalized a dramatic and unprecedented increase to the threshold in May 2016. The Obama administration tried to implement an increase of over 100%, from $23,660 per year to $47,476. That increase was so out of line with past increases and the intent of the FLSA that a federal judge invalidated the rule.

It is possible that the Biden administration will push for similar changes in its own proposed rulemaking, despite the federal courts weighing in on the validity of such increases. Such extreme policies could be devastating to the economy. Proof of the negative impact of these changes can be seen in the sheer number and variety of organizations and industries that submitted comments to DOL on the Obama-era rulemaking. PPWO itself is composed of a range of industries, from private sector businesses to nonprofits, higher education institutions to state and local public entities. It’s clear that a radical change to the overtime regulations would negatively impact the economy.

DOL should hear from the regulated community before developing and issuing a new overtime proposed rulemaking. The last three administrations – those of Presidents Bush, Obama, and Trump – all held stakeholder meetings to hear concerns and input from stakeholders. The Biden administration should do the same to ensure they issue appropriate, reasonable regulations that reflect the current economy environment.

Quick Facts on DOL’s proposal

  • The Biden administration plans to issue a new proposed rulemaking on the overtime regulations in April 2022.
  • The proposal will increase the minimum salary threshold and may alter the duties test.
  • A small group of Congressional Democrats want to increase the salary threshold by over 100% – a devastating amount for small businesses, nonprofits, municipalities, and higher education institutions.
  • A WomanTrend survey found that 63% of the public agree a “one-size-fits-all” approach to overtime rules is inappropriate for the different industries and various regions of the country.
  • A study by the National Retail Federation found that 85% of restaurant and retail managers believe changing employees from salaried to hourly will usher in a variety of negative consequences.