FLSA: New Overtime Rules in 2023

The U.S. Department of Labor (DOL) is set to issue a new proposed overtime rule this May, after several delays. The original deadline was scheduled for April 2022, but it was subsequently postponed to October.

Although the department has not disclosed the specific changes under consideration, it has been actively seeking input from industry stakeholders through several conference calls and regional listening sessions.

According to its latest regulatory agenda, the proposed overtime rule aims to guide on implementing the exemption of executive, administrative, and professional employees from the minimum wage and overtime requirements of the Fair Labor Standards Act (FLSA).

The plan aims to enhance wages and establish safeguards against disproportionate wage disparities.

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Refresher: The standard overtime period

If an employee is covered by the FLSA, they are entitled to overtime pay at a rate of one and a half times their regular pay for any hours worked beyond 40 in a workweek. However, unless an employee works overtime on these days, the FLSA does not mandate the payment of overtime for work completed on weekends, regular days of rest, or holidays.

The Fair Labor Standards Act is applied based on a workweek, which refers to a consistent and recurring period of 168 hours, or seven consecutive 24-hour periods. This workweek does not have to align with the standard calendar week and can commence on any day and at any time.

What employers should do?

Employers of all sizes need to be vigilant in the face of upcoming changes and developments surrounding this area of law. Staying compliant with state and federal overtime rules and regulations can be a challenging task, even for employers with the best intentions.

To maintain compliance and avoid litigation risks, there are several best practices that employers should consider which include carefully evaluating employee classifications, maintaining accurate time and pay records, creating comprehensive policies and procedures for timekeeping, seeking legal advice from the company’s legal department or external counsel, and communicating company policies to employees.

Employers must keep tabs on any overtime-related developments that might affect their operational and compliance practices in the coming months.

What’s ahead?

The public will have the opportunity to provide comments on the upcoming rule changes. Following this, the agency will assess the feedback received and decide whether to proceed with a final rule.

Employers who could be affected by these changes should closely monitor the DOL’s rulemaking process and prepare for a potential rise in the exempt salary threshold and job duties.

Employers may need to decide on whether to increase the salaries of affected employees to a new level to preserve their exempt status or to reclassify them from exempt to non-exempt status when contemplating a salary increase. It is important to note that some jurisdictions may have different regulations than the FLSA and may require higher salary thresholds for exempt status.

Additionally, employers should assess the need to revise job titles to precisely reflect the current duties.

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