The U.S. Department of Labor has proposed an update to the Fair Labor Standards Act, the law dictating what American employees are eligible for overtime pay. These proposed adjustments make more employees eligible for overtime. The full proposed rule updating the overtime salary threshold is available for review.
Under the current law for workers to be exempt from overtime after 40 hours of work, three tests must be satisfied: each individual must (1) be paid above a minimum salary level, (2) be paid on a salary basis (as opposed to hourly or on a piece rate), and (3) perform duties deemed necessary for status as an executive, administrative, or professional employee. There are also unique rules for certain professions, such as outside sales people, firefighters, etc.
The below outlines specific provisions within the proposal:
- $679 per week ($35,308/year) salary threshold proposed. That’s an increase over the current $455/week ($23,660/year) threshold.
- $147,414 per year would be the new salary threshold for Highly Compensated Employees. That would be raised from the current Highly Compensated Employee level of $100,000. To be exempt from overtime, highly compensated employees must satisfy part, but not all of the duties test for their classification (executive, administrative, or professional)
- The public comment period closes in 60 Days once the proposed rule is published.
Nonprofits will find themselves in a difficult position regarding the overtime salary threshold. As employers, while nonprofits would like to pay their employees more, organizations are hard-pressed to increase their revenues to cover the increased costs of complying with the higher salary threshold. Nonprofits typically exist on philanthropic contributions and operate with minimal operational budgets in order to meet community needs for services. Increasing overtime pay requirements may cause some organizations to reduce staff or cut back service hours unless they can find ways to raise more funds from donors.
U.S. Department of Labor is accepting comments from the public about the proposed rule electronically at www.regulations.gov, in the rulemaking docket RIN 1235-AA20. Once the rule is published in the Federal Register, the public will have 60 days to submit comments for those comments to be considered. We encourage organizations to submit comments regarding the proposed overtime rule adjustments and outline how it will impact operations, and ability to provide critical services to clients.
We also request you share this information with DANA so we may provide a collective Delaware impact statement. Please send your comments to Melissa Hopkins, VP Sector Advancement at [email protected].