New overtime pay rules start July 1. Employers say that’s too soon

Employers are pushing back and asking for more time before implementing new federal overtime rules that will require them to pay overtime to more workers.

The new Department of Labor rules take effect in two stages. Normally, employers can opt not to pay their salaried, white-collar employees “time and a half” for overtime hours worked, provided those employees make at least $35,568 a year. But beginning July 1, that salary threshold jumps to $43,888 a year. And Jan. 1, 2025, that figure jumps again to $58,656, meaning many administrative workers are likely to qualify.

The rule change, finalized April 23, has unleashed a parade of complaints from businesses objecting to the degree of the salary hikes and the short implementation deadline. But Department of Labor heads insist the salary updates are necessary because it has been years since any adjustments.

Updates usually happened “every five to nine years between 1938 and 1975. (But) long periods between increases to the salary requirement after 1975 have caused an erosion of the real value of the salary threshold, lessening its effectiveness in helping to identify exempt executive, administrative and professional employees (EAP),” Labor officials announced last month.

While several business groups bemoaned the change, employment advocates and job placement experts applauded the update, saying it was long overdue, given inflationary pressures on wage-earners. Becca Lopez, who heads the employment services division of the Minneapolis-based nonprofit Avivo, said the changes “will provide relief for so many families.”

“At Avivo, we are seeing that the increased cost of living continues to impact lower-paid workers significantly, and it is not uncommon that we see people taking on second and sometimes third jobs to make ends meet,” she said. “Add into that uncompensated overtime for those in salaried administrative, sales, or other professional roles, and there just aren’t enough hours in the day. Compensation for all hours worked will substantially reduce the number of jobs people have to hold to sustain their families.”

Still, employers say they are not happy.

During a May 9 hearing at the U.S. Senate last week, acting U.S. Department of Labor (DOL) Secretary Julie Su said the rule’s two-step phase-in intends to give businesses ample time to prepare for the new rule. Some senators and business groups at the hearing, however, pushed back, arguing it wasn’t enough time, and the new overtime rule could create financial and administrative hardships for businesses.

“This is an arbitrary and burdensome timeline for the regulated community to meet, especially smaller businesses that do not have the resources to make such changes quickly. … The undersigned organizations urge you to extend the implementation date as quickly as possible,” read a letter from the Partnership to Protect Workplace Opportunity, a collection of 87 business groups and industry associations, sent to Congress and DOL.

Signers included the such groups as the National Retail Federation, National Restaurant Association and American Trucking Association as well as scores of others associations representing builders, bankers, beer wholesalers, farm co-ops, colleges, travel agents and more.

All insisted they need more time to digest the payroll changes and implement the new law.

The Labor Department’s “Wage and Hour Division is providing the regulated community with only two months to analyze the rule, determine what changes to their operations and payrolls will be necessary, explain to the impacted workers how and why their pay, titles or workplace responsibilities will change and then implement those changes,” the Partnership’s letter complained.

Krysta Kaner, president of the Twin Cities Society for Human Resources Management, said she expects only small and rural Minnesota firms to feel the pinch of the July 1 rule change because minimum wage hikes have already swept across much of the Twin Cities.

It’s the second rule change slated to begin Jan. 1, 2025 that will probably impact many more companies, no matter their size or where they reside in the state.

Given the complexities of the law, the national 300,000 member Society of Human Resource Management (SHRM) suggested last week the DOL put off implementing any rule changes until January. A January timeline would help “employers to tie any classification or pay-related changes into budgeting efforts and operational changes for the new year,” wrote SHRM Chief of Staff and Government Affairs head Emily M. Dickens.

“Employers with exempt employees making less than the new minimum salary requirements for exempt workers will need to decide whether to raise salaries or reclassify employees as nonexempt,” Dickens’ counseled this week in a separate bulletin to SHRM members. “HR should consider the economic and morale impacts of reclassification.”