Today, the U.S. Department of Labor announced a proposal to increase the Fair Labor Standards Act’s (FLSA) salary-level threshold from $35,568 to $55,068, which would result in many more employees being entitled to overtime pay for hours worked in excess of 40 in a workweek. So, even if an employee is performing otherwise “exempt” duties associated with the Executive, Administrative, Professional, Outside Sales and Computer Employees exemptions, they will still be entitled to overtime for hours worked over 40 unless they are paid at least a salary of $1,059 per week.

The FLSA’s salary-level threshold was last increased in 2019, from $455 to the current $684 per week. This earlier increase reflected the 20th percentile of weekly earnings of full-time salaried employees in the lowest wage Census Region (the South) and in the retail industry nationally.

For New York employers, this increase will have no effect on their New York-based employees, because New York’s salary threshold is already higher than the proposed increase under the FLSA. As of December 21, 2022, New York’s annual salary threshold was $58,500 for New York City, Long Island and Westchester employees, and $55,341 for employees in the rest of the state. (New York’s salary-level threshold will likely increase in 2024 in line with planned minimum wage increases that will take effect on January 1.)

Connecticut and Massachusetts employers, however, would experience a significant increase in the salary-level threshold should the Department of Labor’s increase become final. Currently, the salary-level threshold in Connecticut and Massachusetts is $35,568 (or $684 per week).

The Department of Labor will consider written comments on its proposal over the next 60 days. It seems likely that the salary-level threshold will increase, although it is too soon to say whether it will increase by the proposed amount.

Key Takeaways

  1. Significant Proposed Increase: The U.S. Department of Labor intends to boost the FLSA salary-level threshold from $35,568 to $55,068. This marks a substantial change affecting the weekly salary required for overtime eligibility.
  2. Overtime Implications: With the new proposal, even employees with “exempt” duties would be entitled to overtime if they work over 40 hours and earn less than $1,059 per week.
  3. State-Specific Impact: New York clients are unaffected due to already higher thresholds. However, Connecticut and Massachusetts, currently at the same threshold as the current FLSA rate, would feel a significant impact if the new increase goes into effect.
  4. Timelines and Feedback: The Department of Labor is accepting comments to its proposed rule for the next 60 days. It points towards the potential of an increase in the salary-level threshold, but the exact rise remains uncertain.
  5. The “Duties Test”: The proposed rule does not modify the exempt duties tests for the white-collar exemptions. Remember, in order to be exempt from overtime, an employee must be performing exempt duties under one of the white-collar exemptions, and paid at least a weekly salary that satisfies the salary-level threshold.

Please feel free to reach out to Murtha Cullina LLP’s Labor & Employment group if you have any questions.