On April 23, the U.S. Department of Labor (DOL) issued its final rule changing the rules governing worker eligibility for overtime in accordance with the Fair Labor Standards Act (FLSA). The FLSA requires most employers to pay their “non-exempt” hourly workers time and a half (150 percent of their hourly wage) for every hour of work over 40 hours per week. The rule will become effective on July 1, 2024 and will be implemented in two phases for both categories of affected workers: minimum wage earners and “highly compensated employees” (HCEs).

Phase 1 is scheduled to begin on July 1, 2024; Phase 2 is planned for January 1, 2025. The final rule also establishes a new system by which future threshold updates will be made automatically. The automation of salary threshold changes is meant to increase the thresholds for both minimum wage earners and HCEs every three years on July 1; it is intended to reflect changes in wage data as they occur, without requiring the DOL to engage in additional rulemaking. This will allow the DOL to avoid additional public notice and comment periods.

For minimum wage workers, beginning on July 1, the salary threshold will be increased from $35,568 to $43,888 in its first phase. Beginning on January 1, 2025, the minimum wage workers’ annual eligibility threshold will increase again, this time to $58,656.

For HCEs, beginning on July 1, the salary threshold will increase from $107,432 to $132,964. Then, on January 1, 2025, HCEs’ salary threshold will increase again, this time to $151,164. At that point, the HCE salary threshold for overtime eligibility will have increased by a staggering 71 percent in a mere six months.

The final rule follows the publication of a Notice of Proposed Rulemaking (NPRM), to which PIA responded last fall. PIA’s letter detailed several concerns meant to alert the DOL to the proposal’s many risks, which include but are not limited to:

• Increasing the cost incurred by employers to hire and retain workers
• Incentivizing employers to cut labor costs by laying people off
• Worsening working conditions
• Reducing work hour flexibility for employers and workers
• Denying workers career advancement opportunities currently available to them
• Increasing employer confusion and inadvertent misclassification of workers

DOL’s rule could force the reclassification of millions of employees from salaried to hourly workers. Reclassified employees could be denied opportunities for career advancement, flexible work arrangements, and satisfactory working conditions.

PIA expressed its opposition to the proposed overtime rule, and our many concerns were not addressed by the DOL in its promulgation of the final rule. PIA will continue to support efforts to delay the effective date of the final rule and discourage the DOL from implementing it.