Proposed Increase for Exempt Employees Minimum Salaries
Biden Administration Proposes to Increase Overtime Pay for 3.6 million Workers
The Biden administration is proposing to increase the salary threshold for overtime pay, which would make millions of workers eligible for additional compensation. Currently, under the Fair Labor Standards Act (FLSA), non-exempt employees, who are normally paid an hourly rate, are guaranteed time-and-a-half pay for any work exceeding 40 hours in a single workweek. However, exempt workers only enjoy this benefit if their annual income falls below $35,568. Under the proposed changes, any exempt employee making less than $55,000 per year, or $1,059 per week, would be eligible for overtime.
“I’ve heard from workers again and again about working long hours, for no extra pay, all while earning low salaries that don’t come anywhere close to compensating them for their sacrifices,” said Acting Labor Secretary Julie Su. The Biden administration’s proposed increase would bring the salary threshold for overtime pay more in line with the average wage in the U.S. It would also make millions of workers who are currently ineligible for overtime pay eligible for additional compensation.
A Look into Specifics
It’s important to note the proposed changes target the Executive, Administrative and Professional (EAP) employee categories under FLSA rules. There’s also a proposed increase for the highly compensated employee (HCE) exemption: from the current $107,432 annual salary to a proposed $143,988.
In a progressive move to keep the thresholds relevant to the changing economic landscape, the Biden administration also proposes automatic updates to the EAP salary level and HCE total annual compensation requirements every three years.
With its fluctuating demands, especially during peak seasons, the retail industry is poised for significant adjustments. Many of its managers and supervisors often exceed standard working hours without corresponding overtime compensation. Similarly, the hospitality sector, which encompasses hotels and restaurants, witnesses many salaried employees working beyond regular hours, particularly during high-demand periods like holidays or significant events.
Healthcare, too, is on the frontline of these changes. Administrative professionals and emerging practitioners often work beyond conventional hours, currently without the benefits of overtime pay.
The manufacturing sector, a cornerstone of the American economy, will also feel the ripples of this proposed change. Many salaried positions in manufacturing, from line supervisors to certain administrative roles, frequently require extended hours to meet production targets or oversee essential operations. This new proposal could redefine compensation structures in many industries.
State Laws: A Parallel Consideration
While federal proposals often garner significant attention, it’s important to remember the state-specific labor laws. Some states set a higher minimum salary than the federal mandate, and in these instances, employers must adhere to the state’s guidelines.
Public Comment Period
The proposed rule is subject to a 60-day public comment period before it can take effect. “Public input is essential as we consider the needs of today’s workforce and industry demands, and we encourage continued stakeholder input during the public comment period,” said Jessica Looman, the Labor Department’s Principal Deputy Wage and Hour Division Administrator.
What Can You Do?
It is important to note that these are proposed changes and are not law yet. As these discussions progress, those in the retail, hospitality, manufacturing and healthcare sectors should especially remain vigilant and proactive in contributing to the dialogue, ensuring the voice of the most affected is heard. In addition, review your current compensation structures within the different classes of employees to determine potential impacts to your business.
We will continue to monitor this proposed change. If you have questions, please contact an Adams Brown advisor.