The Department of Labor issued a final rule on Tuesday, April 23, that drastically expands the number of salaried employees who qualify for overtime pay.
The rule will go into effect on July 1 and will increase the minimum annual salary threshold at which workers are exempt from overtime pay requirements from $35,568 to $43,888. On Jan. 1, 2025, that threshold will rise to $58,656, and further threshold increases will occur every three years beginning in 2027. Employees who qualify for overtime pay must receive at least 1.5 percent pay for any hours worked more than 40 for a week.
The rule has been opposed by many business groups and trade associations, who have warned that it would increase the already rising cost of labor and put the economy at risk. “This is deeply troubling, particularly amidst rampant inflation and the looming threat of recession,” Lauren Williams, associate vice president of government relations at the National Association of Wholesaler-Distributors (NAW), said in a statement. “Distributors have spent recent years adapting operations and personnel management to meet evolving workforce needs post-pandemic, the DOL’s rule would add new regulatory burdens and compliance costs to an industry already grappling with workforce shortages and excessive regulations.
“Increasing the minimum salary threshold by at least 65 percent will stifle employee growth opportunities, diminish workplace autonomy and limit flexibility,” she continued.
Williams noted that courts have previously struck down similar rules because the Department of Labor cannot impose a salary-level test that undermines the prescribed duties test, which exempts employees from overtime pay if their job involves executive, administrative or professional duties. NAW said it would exhaust all avenues, including legal resources, to prevent the updated overtime rule from being enforced.