The issue
In April 2024, the Department of Labor finalized a two-step increase in the salary threshold for white-collar employees to be exempt from overtime requirements. The first phase, which took effect July 1, 2024, increased the threshold from $35,568 per year to $43,888. The second phase will raise the threshold to $58,656 on January 1, 2025, with automatic increases set to take effect every three years beginning July 1, 2027.
NRF has objected to these changes since the DOL first proposed them in November 2023. NRF remains concerned that the new rules curtail retailers’ ability to offer the most flexible, generous and tailored benefits packages to lower-level exempt employees across the industry.
Why it matters to retailers
When the final version of the regulations was released, the DOL estimated that an additional 3.4 million workers would be required to be paid overtime when working more than 40 hours a week. However, an analysis commissioned by NRF found that the new rules would actually impact more than 7.2 million workers. Complying with the new rules will require employers to reexamine individual compensation packages for millions of workers nationwide and inform workers of changes that will significantly impact them.
Some workers may lose the status of a managerial position under the new rules, including much-desired flexibility as to when, how and where they work, including the ability to work from home. Workers could also lose the ability to travel on their employer’s behalf and valuable educational and training experiences. Regardless, both employers and affected employees will need time to absorb the impacts and mitigate the burden this rules’ implementation will impose on all parties.
NRF advocates for reasonable overtime regulations
The purpose of the salary threshold is to establish a meaningful divide between the earnings of exempt and nonexempt employees, and the DOL is most effective when it analyzes the threshold on an as-needed and considered basis.
NRF opposes both the 65% increase in the salary threshold and the inclusion of automatic increases. NRF and other business trade associations filed suit against the final rules, arguing that the DOL has exceeded its legal authority under both the Fair Labor Standards Act and Administrative Procedure Act. A decision is currently pending.