Proposal to Extend Overtime Protections

The proposed rule would dramatically increase the salary threshold for the so called “white-collar exemption.”

August 31, 2023

On August 30, the U.S. Department of Labor announced a notice of proposed rulemaking that would extend overtime protections to 3.6 million salaried workers. The proposed rule would guarantee overtime pay for most salaried workers earning less than $1,059 per week, about $55,000 per year. An increase over the current threshold, established in January 2020 of $684 per week, just over $35,000 per year.

The proposed rulemaking comes after months of speculation on when the Department would issue the proposal. Interested parties, including NACS, have participated in listening sessions over that time attempting to inform the Department of the impacts changes to the rule could have on industries like ours. This proposal is very similar the final rule issued under the Obama Administration in 2016 which was ultimately invalidated by a federal district court in Texas.

The proposed rule would do the following:

  • Increase the standard salary level of the Fair Labor Standards Act from $684 to $1,059 per week, or $55,068 per year.
  • Increase the total annual compensation requirement for highly compensated employees from $107,432 per year to $143,988 per year.
  • Automatically update the salary threshold every three years to current earnings data and keep pace with changes in workers’ salaries.
  • Restore overtime protections for U.S. territories where the federal minimum wage is applicable so that workers in those territories have the same overtime protections as other U.S. workers.

NACS has concerns that the proposed rule would create unjustified burdens and costs for employers. While the industry recognizes the importance of reviewing and updating this regulation and has supported that in comments in the past, the Department has missed the mark with this proposal. The current overtime rule works for both employees and employers. The proposal issued by the Department of Labor will simply exacerbate an already challenging labor market for the convenience store industry which has significantly increased average wages over the past few years in efforts to attract more workers while, in reality, not doing much for the workers they claim will benefit.

While the proposed rule is not law yet, there are plenty of things to consider as it goes through the regulatory process. The next step is a 60-day notice-and-comment period during which interested parties can review the proposal and provide their input about suggested changes, which can be extended depending on the volume of comments. The agency is then required to take each comment into account and then determine whether to adjust the proposed rule before it becomes final. If there are not significant changes between this proposal and their eventual final rule, it is highly likely that significant litigation will follow.

Fisher Phillips provides further details on the proposal process and best ways to prepare for the rule to go into effect in this article.