On August 30, 2023, the US Department of Labor (DOL) finally released their long-awaited proposal for updating the FLSA. This includes increasing the minimum salary that an exempt employee must earn to avoid overtime eligibility to nearly $55,000 per year. There are many other key aspects of the DOL’s proposal, so stay tuned to MP as we will be offering content in a variety of formats as this story unfolds.  

But before we address any potential changes, let’s take a brief look at the current FLSA. 

A Brief Look at the FLSA 

The FLSA has been protecting the rights of workers for more than 80 years, establishing certain basic labor standards including minimum wage, overtime pay, and child labor regulations. Unless otherwise exempt, the FLSA ensures that employees are paid time and a half whenever working more than 40 hours in a work week. The FLSA also dictates strict recordkeeping requirements to track hours worked and wages paid.  

Enforced by the US Department of Labor Wage and Hour Division (WHD) of the U.S. Department of Labor,¹ the FLSA does not require employers to provide: 

• Time off for holidays 
• Vacations or sick leave 
• Meal periods or rest breaks 
• Premium pay for weekend or holiday work 
• Notice prior to termination or layoff  
• Pay raises or fringe benefits.  

It’s essential to remember that while the FLSA does not require employers to provide the above-listed items, state and local laws may have additional requirements on these matters. Employers must comply with state and local labor laws to ensure they’re meeting all relevant obligations related to employee compensation and benefits. Failure to comply with labor laws can lead to severe legal consequences, including monetary fines, penalties, and even imprisonment.  

As we wait to hear about the potential 2023 changes to the FLSA, let’s take a look at the most recent changes to FLSA regulations, which include the following: 

• Effective January 1, 2020 the “standard salary level” was raised to $684 per week (equivalent to $35,568 per year for a full-year worker).  
• The total annual compensation requirements for “highly compensated employees” was increased to $107,432 per year. 

• Additionally, in the Fall of 2021, the DOL formally listed the publication of a new Overtime Final rule to its regulatory agenda. While that rule is on the agency’s agenda, it has not yet been confirmed as an actual regulation.  

A Recent U.S. Supreme Court Ruling Impacts Overtime Pay  

It’s important to note that not all changes to labor regulations are the result of a DOL decision. Case in point is the February 2023 decision by the U.S. Supreme Court in Helix Energy Solutions Group, Inc. v. Hewitt. 

In short, a highly compensated employee sued his employer for overtime pay. But wait! How can that be? Although he was a highly compensated employee paid over $100,000 per year, he was not paid by means of a weekly salary. Instead, he was paid at a daily rate—and, therefore, believed he was entitled to overtime pay.  

One year later, the Court announced their decision, agreeing with the employee. The Court found that the employee “was not an executive exempt from the Fair Labor Standards Act’s overtime pay guarantee; daily-rate workers, of whatever income level, qualify as paid on a salary basis only if the conditions set out in 29 C.F.R. § 541.604(b) ² are met.” 

The importance (and implications) of this decision cannot be stressed enough. Companies must understand how to pay employees (regardless of their designation) with respect to non-traditional forms of salary compensation. Moreover, employers should make it a point to routinely review the description of their employees’ duties—and continue to be diligent about strict recordkeeping and tracking of an employee’s hours should they not meet the “duties test” under FLSA regulations.  

 We’ve briefly talked about the importance of complying with overtime regulations and what is involved, but perhaps you’re wondering how a potential FLSA rule becomes an actual regulation.   

Turning a Potential Rule into an Actual Regulation 

The general process for moving a potential rule, or a change to a rule, to becoming a new enforceable regulation under the FLSA entails the following; 

• Once the rule is proposed, there is generally a 60-day public comment period where members of the public can voice their opinions on the proposed changes. Regulations that are open for public comment are posted on Regulations | U.S. Department of Labor (dol.gov).   
• At times, the federal agencies will send its representatives around the country to hold “listening sessions,” where these representatives will hear from the public regarding these proposed changes. 
• Once the listening sessions and the public comment period has ended, the agency begins the final rulemaking process for turning proposed changes into enforceable federal regulations. To learn more, see the DOL’s Rulemaking and Regulations Resources.  

And, if you’re wondering when we can expect the proposed 2023 FLSA regulations to be finalized, that probably won’t happen until early 2024.  

Just a Reminder 

Overtime regulations are a critical component of labor laws. When an employer is deciding to pay an employee on a salary basis without overtime eligibility and without tracking their hours, it is crucial that the company is confident the employee is exempt by the definitions set forth within the FLSA. It would also be important to aware of state specific regulations. Please speak with us if you’re interested in reviewing your employee classifications and means of compensation. 

To learn more about compliance with federal overtime regulations, be sure to read MP’s article, “Preparing for Upcoming FLSA Changes: Revisiting the FLSA, and the Importance of Complying with Overtime Regulations.”

Questions? Comments? Contact us today!  

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