Last month, US Senator Sherrod Brown introduced the Restoring Overtime Pay Act of 2023 (“ROP Act”) in Congress, a bill that seeks to increase the exempt salary threshold, thereby providing overtime protections to many more employees who are currently classified as exempt under the Fair Labor Standards Act (“FLSA”). If passed, the bill would update the FLSA, which was first enacted in 1938 and has not been significantly amended with respect to minimum wage and overtime exemptions since 2004.
Current FLSA Requirements
The FLSA established the 40-hour workweek and mandated that employers pay employees an overtime premium at a rate of one and a half (1.5) times their regular rate of pay for work beyond 40 hours per workweek. Under the administrative, executive, and professional exemptions, employees are exempt from overtime pay if they are paid on a salary basis, paid at least the designated minimum salary, and perform certain duties.
Currently, employees earning more than $35,568 per year ($684 per week) are generally exempt from Federal overtime pay requirements. The bill proposes to initially raise the Federal overtime salary threshold to $45,000 from the effective date of the ROP Act, and incrementally increase it by $10,000 thereafter to account for inflation and the rising cost of living.
Why Does Congress Want to Increase the Threshold?
The main rationale for increasing the exempt salary threshold is to make more employees eligible for overtime. Additionally, the current Biden administration does not believe the current threshold is high enough.
The bill has received support from a range of advocacy groups, including labor unions, worker rights organizations, and progressive think tanks. Supporters argue that the bill is necessary to address growing inequality and to ensure that employees are fairly compensated for their labor. They also note that the bill would stimulate economic growth by putting more money into the hands of employees, who are likely to spend it on goods and services.
Opponents of the ROP Act, however, argue that the bill would be costly for employers and could lead to job losses or reduced hours for employees. However, since the bill includes provisions to phase in the new threshold over several years, supporters note that the bill would give employers time to adjust their operations and minimize any potential negative impacts.
MNK Law will continue to monitor developments with respect to the Restoring Overtime Pay Act of 2023. For more information on the proposed bill and exempt salary threshold, please contact us at info@mnklawyers.com.
This material is provided for informational purposes only. It is not intended to constitute legal advice, nor does it create a client-lawyer relationship between MNK Law and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material.
