The Biden administration has announced a final rule that it says expands overtime protections for salaried workers by increasing the salary thresholds required to exempt a salaried executive, administrative or professional employee from federal overtime pay requirements. Convenience-store and other retail groups oppose the rule.
Effective July 1, 2024, the salary threshold will increase to the equivalent of an annual salary of $43,888 and increase to $58,656 on Jan. 1, 2025. The July 1 increase updates the current annual salary threshold of $35,568 based on the methodology used by the prior administration in the 2019 overtime rule update.
On Jan. 1, 2025, the rule’s new methodology takes effect, resulting in the additional increase. In addition, the rule will adjust the threshold for “highly compensated” employees. Starting July 1, 2027, salary thresholds will update every three years by applying up-to-date wage data to determine new salary levels.
“This rule will restore the promise to workers that if you work more than 40 hours in a week, you should be paid more for that time,” said Acting Secretary of Labor Julie Su. “Too often, lower-paid salaried workers are doing the same job as their hourly counterparts but are spending more time away from their families for no additional pay. That is unacceptable. The Biden-Harris administration is following through on our promise to raise the bar for workers who help lay the foundation for our economic prosperity.”
Industry Concerns
“The new rules curtail retailers’ ability to offer the most flexible, generous and tailored benefits packages to lower-level exempt employees across the industry,” said David French, executive vice president of government relations for the National Retail Federation (NRF).
“We are also concerned that the department has not provided adequate time for retailers to implement changes to the first phase of the rule, which will increase the minimum salary threshold from $35,568 to $43,888 by July 1, 2024. We urge the department to allow until at least Sept. 1, 2024, to implement this change,” he said.
In November 2023, Washington, D.C.-based NRF submitted comments to the Labor Department opposing its proposed rule on overtime regulation. It also commissioned Oxford Economics to analyze the economic effects if implemented. The analysis found that the proposed rule could affect more than 7.2 million workers.
“Even with the phased-in implementation timeline, the new rules will cause employers to reexamine compensation packages for millions of workers nationwide,” NRF said. “Some workers may lose the status of a managerial position. Some may lose much-desired flexibility as to when, how and where they work, including the ability to work from home. Some may lose the capability to travel on the employer’s behalf. Some may lose valuable educational and training experiences. Finally, retailers remain concerned that the inclusion of future automatic increases exceeds the department’s legal authority and oversteps longstanding Fair Labor Standards Act and Administrative Procedure Act principles.”
While the NRF acknowledges that the delay in full implementation of the new higher threshold will enable retailers to prepare for the full effect of the rule more thoroughly, it remains “concerned, however, that the new rules curtail retailers’ ability to offer the most flexible, generous and tailored benefits packages to lower-level exempt employees across the industry.”
The National Association of Convenience Stores (NACS) also filed comments in November regarding the Fair Labor Standards Act, the group said. NACS opposed the increase, saying it would most noticeably affect store managers and assistant managers.
“We are disappointed that the Department of Labor did not listen to the reality of the problems its overtime proposal will cause,” said Doug Kantor, general counsel for Alexandria, Virginia-based NACS. “By dramatically changing the law and treating every market in the country as if they are the same, the Department of Labor is doing a disservice to employees and small businesses alike. The rule will reduce employees’ flexibility and its costs will fuel inflation. It is even worse for businesses and their employees than the one that the courts struck down in 2017. We expect that the rule announced today will be challenged and overturned as well.”
The Labor Department said it conducted extensive engagement with employers, workers, unions and other stakeholders before issuing its proposed rule in September 2023, and considered more than 33,000 comments in developing its final rule. The updated rule defines and delimits who is a bona fide executive, administrative and professional employee exempt from the Fair Labor Standards Act’s overtime protections.
“The Department of Labor is ensuring that lower-paid salaried workers receive their hard-earned pay or get much-deserved time back with their families,” said Wage and Hour Division Administrator Jessica Looman. “This rule establishes clear, predictable guidance for employers on how to pay employees for overtime hours and provides more economic security to the millions of people working long hours without overtime pay.”
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