New Federal Law Proposed-Who Should be Paying Attention? Employers.
The Fair Labor Standards Act (FLSA) is a federal law in the United States that sets minimum wage, overtime pay, recordkeeping, and youth employment standards for employees in both the private and public sectors. The FLSA also establishes exemptions from these standards for certain employees who meet specific criteria.
One of the most common exemptions under the FLSA is the “white-collar” exemption, which applies to certain executive, administrative, and professional employees who earn above a certain salary threshold. The salary level threshold for this exemption is currently set at $684 per week or $35,568 per year, meaning that employees who earn less than that amount are generally entitled to overtime pay under the FLSA.
In 2019, the Department of Labor (DOL) announced a new final rule that would have increased the salary level threshold for the white-collar exemption to $913 per week or $47,476 per year. This rule was set to take effect on January 1, 2020, but was later blocked by a federal court and subsequently withdrawn by the DOL.
Now, the House and Senate have both introduced the Restoring Overtime Pay Act which, if signed into law, would immediately increase the salary threshold to $865 per week or $45,000 per year. After the initial bump, the salary threshold would automatically increase by $10,000 in each subsequent year until the threshold reaches $75,000 in 2026. Starting in 2027, the salary threshold will increase to an annualized amount equal to the rate of the 55th percentile of weekly earnings of full-time salaried workers nationally, which will be determined by the Bureau of Labor Statistics using data from the second quarter of 2026.
The stated purpose of the act is to strengthen overtime protections by increasing the number of workers who would be eligible for overtime pay. For companies that employ exempt workers, we recommend keeping your finger on the pulse of these laws as you may need to raise salary thresholds in order to continue classifying these employees as exempt. Stay tuned.