Federal

Restoring Overtime Pay Act of 2023

Source: Congress.gov · 1,944 words in original text

What This Bill Does

This bill changes the rules for which workers can be classified as exempt from overtime pay. It requires workers in executive, administrative, and professional jobs to earn a minimum salary to qualify for this exemption. The bill also automatically increases this minimum salary amount each year based on worker earnings data.

Who It Affects

Workers in executive, administrative, and professional jobs. Employers who currently classify workers in these roles as exempt from overtime requirements. The Secretary of Labor (the federal official in charge of workplace rules). The Bureau of Labor Statistics (the federal agency that collects earnings data).

Key Provisions

• Employees claiming executive, administrative, or professional status must be paid at least a weekly salary that meets an annualized threshold to be exempt from overtime pay requirements. (Sec. 3(a)) • The minimum salary threshold starts at $45,000 per year when the law takes effect, increases to $55,000 on January 1, 2024, then to $65,000 on January 1, 2025, then to $75,000 on January 1, 2026. (Sec. 3(a)(2)(A)) • Beginning January 1, 2027, the minimum salary threshold equals the 55th percentile of weekly earnings for full-time salaried workers nationwide based on second quarter data from 2026. (Sec. 3(a)(2)(A)(v)) • The Secretary must automatically update the salary threshold annually after January 1, 2027, without following standard federal rulemaking procedures. (Sec. 3(a)(2)(C)) • The Secretary must announce the new salary threshold at least 60 days before it takes effect in the Federal Register and on the Department of Labor website. (Sec. 3(a)(2)(D)) • The Bureau of Labor Statistics must publish weekly earnings data for full-time salaried workers by geographic region within 21 days after each calendar quarter ends. (Sec. 3(b))

What Changes

If this bill becomes law, employers will need to pay workers classified as executive, administrative, or professional employees significantly more money to keep them exempt from overtime requirements. Starting immediately at $45,000 per year, this threshold rises to $75,000 by 2026, then adjusts yearly based on actual worker earnings data. This means more workers will qualify for overtime pay (time and a half for hours over 40 per week) because they will not meet the higher salary threshold. The federal government will automatically update this threshold each year without holding public comment periods typically required for new regulations.

Important Definitions

Bona fide executive, administrative, and professional employees: Workers whose main job duties fall into these categories and who meet salary and duties requirements (explained in federal regulation Part 541, Title 29). Exempt/Exemption: Not required to receive overtime pay when working more than 40 hours per week. Salary basis: Being paid a regular, fixed amount each week regardless of hours worked. 55th percentile of weekly earnings: The earnings level where 55 percent of full-time salaried workers earn less and 45 percent earn more.

Effective Date

The first day of the third month that begins after the bill is signed into law.

II 118TH CONGRESS 1ST SESSION S. 1041 To amend the Fair Labor Standards Act of 1938 to establish a minimum salary threshold for bona fide executive, administrative, and professional employees exempt from Federal overtime compensation requirements, and automatically update such threshold each year, and for other pur- poses. IN THE SENATE OF THE UNITED STATES MARCH 29, 2023 Mr. BROWN (for himself, Mr. SCHUMER, Mr. SANDERS, Ms. BALDWIN, Mr. BLUMENTHAL, Mr. BOOKER, Ms. CANTWELL, Mr. CASEY, Ms. DUCKWORTH, Mr. DURBIN, Mr. LUJA´N, Mr. MARKEY, Mr. MERKLEY, Mr. MURPHY, Mrs. MURRAY, Mr. PADILLA, Mr. REED, Mr. SCHATZ, Ms. WARREN, and Mr. WYDEN) introduced the following bill; which was read twice and referred to the Committee on Health, Education, Labor, and Pensions A BILL To amend the Fair Labor Standards Act of 1938 to establish a minimum salary threshold for bona fide executive, ad- ministrative, and professional employees exempt from Federal overtime compensation requirements, and auto- matically update such threshold each year, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 VerDate Sep 11 2014 21:29 Apr 07, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1041.IS S1041 pbinns on DSKJLVW7X2PROD with $$_JOB 2 •S 1041 IS SECTION 1. SHORT TITLE. 1 This Act may be cited as the ‘‘Restoring Overtime 2 Pay Act of 2023’’. 3 SEC. 2. FINDINGS. 4 Congress finds the following: 5 (1) The Fair Labor Standards Act of 1938 (29 6 U.S.C. 201 et seq.) established overtime compensa- 7 tion requirements for certain employees when they 8 work more than 40 hours in a given workweek. 9 (2) Under section 13(a)(1) of such Act, Con- 10 gress delegated to the Secretary of Labor the au- 11 thority to define and delimit the terms relating to 12 the exemption for bona fide executive, administra- 13 tive, and professional employees (commonly known 14 as the ‘‘white-collar exemption’’). 15 (3) For more than 75 years, the Secretary of 16 Labor has exercised the Secretary’s delegated au- 17 thority to issue regulations that define and delimit 18 the terms relating to the white-collar exemption by 19 applying a duties test and applying a minimum com- 20 pensation level (or salary threshold). 21 (4) The Secretary of Labor began utilizing a 22 salary threshold in the initial regulations defining 23 and delimiting the terms relating to the white-collar 24 exemption, which were first issued in 1938. 25 VerDate Sep 11 2014 21:29 Apr 07, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1041.IS S1041 pbinns on DSKJLVW7X2PROD with $$_JOB 3 •S 1041 IS (5) Congress has long approved the use of a 1 salary threshold by the Secretary of Labor, as dem- 2 onstrated by the fact that Congress has amended the 3 Fair Labor Standards Act of 1938 at least 10 times 4 since 1938 and has not precluded the Secretary 5 from using a salary threshold. 6 (6) The salary threshold became woefully out of 7 date and ineffective as a result of not being suffi- 8 ciently updated to keep pace with the changing econ- 9 omy, as evidenced by the fact that 63 percent of all 10 full-time salaried workers were guaranteed overtime 11 pay under section 7 of the Fair Labor Standards 12 Act of 1938 based on their salaries in 1975 while, 13 in 2022, less than 15 percent of all full-time salaried 14 workers are guaranteed such overtime pay under the 15 overtime rule promulgated on September 27, 2019. 16 (7) Weak overtime protections also hurt the 17 many workers who are forced into part-time jobs but 18 need full-time jobs to support themselves and their 19 families. When employers can no longer overwork 20 employees who are exempt from overtime pay be- 21 cause of lax standards, they will be forced to spread 22 work and hours across their workforce. Restoring 23 overtime protections is especially important in 2023, 24 as the economy of the United States is still recov- 25 VerDate Sep 11 2014 21:29 Apr 07, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1041.IS S1041 pbinns on DSKJLVW7X2PROD with $$_JOB 4 •S 1041 IS ering from the pandemic and many workers report 1 their employers demanding excessive hours. 2 (8) In 2015, when the Department of Labor 3 proposed an increase to the overtime salary thresh- 4 old rule under the Obama Administration, it found 5 that the historic range of the overtime salary thresh- 6 old under the Fair Labor Standards Act of 1938 ran 7 from approximately the 35th to the 55th percentile 8 of weekly earnings for all full-time salaried workers. 9 By phasing the overtime salary threshold back up to 10 the 55th percentile of earnings of full-time salaried 11 workers nationally—which after adjusting for infla- 12 tion is projected to translate to an annualized 13 amount of $73,551 in 2021 and $82,745 by 2026 14 (roughly the level of the boldest State overtime 15 threshold increase)—the United States can restore 16 overtime protections to historic levels. 17 SEC. 3. MINIMUM SALARY THRESHOLD FOR BONA FIDE EX- 18 ECUTIVE, ADMINISTRATIVE, AND PROFES- 19 SIONAL EMPLOYEES EXEMPT FROM FEDERAL 20 OVERTIME COMPENSATION REQUIREMENTS. 21 (a) IN GENERAL.—Section 13 of the Fair Labor 22 Standards Act of 1938 (29 U.S.C. 213) is amended— 23 (1) in subsection (a)(1)— 24 VerDate Sep 11 2014 21:29 Apr 07, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1041.IS S1041 pbinns on DSKJLVW7X2PROD with $$_JOB 5 •S 1041 IS (A) by inserting ‘‘subsection (k) and’’ after 1 ‘‘subject to’’; and 2 (B) by inserting ‘‘(except as provided 3 under subsection (k)(2)(C))’’ after ‘‘Administra- 4 tive Procedure Act’’; and 5 (2) by adding at the end the following: 6 ‘‘(k) MINIMUM SALARY THRESHOLD.— 7 ‘‘(1) IN GENERAL.—Beginning on the effective 8 date of the Restoring Overtime Pay Act of 2023, the 9 Secretary shall require that an employee described in 10 subsection (a)(1), as a requirement for exemption 11 under such subsection, be compensated on a salary 12 basis, or equivalent fee basis, within the meaning of 13 such terms in subpart G of part 541 of title 29, 14 Code of Federal Regulations (or any successor regu- 15 lation), at a rate per week that is not less than the 16 weekly rate of the applicable annualized salary 17 threshold under paragraph (2). 18 ‘‘(2) SALARY THRESHOLD.— 19 ‘‘(A) IN GENERAL.—Subject to subpara- 20 graphs (B) and (C), the applicable annualized 21 salary threshold shall be— 22 ‘‘(i) $45,000, beginning on the effec- 23 tive date of the Restoring Overtime Pay 24 Act of 2023; 25 VerDate Sep 11 2014 21:29 Apr 07, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1041.IS S1041 pbinns on DSKJLVW7X2PROD with $$_JOB 6 •S 1041 IS ‘‘(ii) $55,000, beginning on January 1 1, 2024; 2 ‘‘(iii) $65,000, beginning on January 3 1, 2025; 4 ‘‘(iv) $75,000, beginning on January 5 1, 2026; and 6 ‘‘(v) beginning on January 1, 2027, 7 an annualized amount that is equal to the 8 rate of the 55th percentile of weekly earn- 9 ings of full-time salaried workers nation- 10 ally, as determined by the Bureau of Labor 11 Statistics based on data from the second 12 quarter of 2026. 13 ‘‘(B) INCREASED THRESHOLD.—The Sec- 14 retary may establish, through notice and com- 15 ment rulemaking under section 553 of title 5, 16 United States Code, a salary threshold that is 17 a rate that— 18 ‘‘(i) is greater than the applicable 19 annualized salary threshold under subpara- 20 graph (A); and 21 ‘‘(ii) is calculated based on a data set 22 and methodology established by the Sec- 23 retary that are capable of being updated in 24 accordance with subparagraph (C). 25 VerDate Sep 11 2014 21:29 Apr 07, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1041.IS S1041 pbinns on DSKJLVW7X2PROD with $$_JOB 7 •S 1041 IS ‘‘(C) AUTOMATIC UPDATES.— 1 ‘‘(i) IN GENERAL.—Not later than 1 2 year after the salary threshold first takes 3 effect under subparagraph (A)(v), and an- 4 nually thereafter, or, in the case in which 5 the Secretary establishes an increased sal- 6 ary threshold under subparagraph (B), an- 7 nually after establishing such increased 8 salary threshold, the Secretary shall up- 9 date the rate of the salary threshold in ef- 10 fect under subparagraph (A)(v) or (B), as 11 applicable, so that such rate is equal to— 12 ‘‘(I) in the case in which the Sec- 13 retary does not establish an increased 14 salary threshold under subparagraph 15 (B), the 55th percentile of weekly 16 earnings of full-time salaried workers 17 nationally, as determined by the Bu- 18 reau of Labor Statistics based on data 19 from the second quarter of the cal- 20 endar year preceding the calendar 21 year in which such updated amount is 22 to take effect; and 23 ‘‘(II) in the case in which the 24 Secretary establishes an increased sal- 25 VerDate Sep 11 2014 21:29 Apr 07, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1041.IS S1041 pbinns on DSKJLVW7X2PROD with $$_JOB 8 •S 1041 IS ary threshold under subparagraph 1 (B), the greater of— 2 ‘‘(aa) the 55th percentile de- 3 scribed in subclause (I); and 4 ‘‘(bb) the increased salary 5 threshold established under sub- 6 paragraph (B), as updated in ac- 7 cordance with the data set and 8 methodology established by the 9 Secretary under subparagraph 10 (B)(ii). 11 ‘‘(ii) NONAPPLICABILITY OF RULE- 12 MAKING.—Section 553 of title 5, United 13 States Code, shall not apply to any update 14 described in this subparagraph. 15 ‘‘(D) NOTICE REQUIREMENT.—Not later 16 than 60 days before a revised salary threshold 17 under this paragraph takes effect, the Secretary 18 shall publish a notice announcing the amount in 19 the Federal Register and on the internet 20 website of the Department of Labor.’’. 21 (b) PUBLICATION OF EARNINGS.—Not later than 21 22 days after the end of each calendar quarter, the Bureau 23 of Labor Statistics shall publish on its public website, for 24 each week of such quarter, data on the weekly earnings 25 VerDate Sep 11 2014 21:29 Apr 07, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1041.IS S1041 pbinns on DSKJLVW7X2PROD with $$_JOB 9 •S 1041 IS of full-time salaried workers by census region (as des- 1 ignated by the Bureau of the Census). 2 SEC. 4. NONEXEMPT DUTIES LIMIT FOR BONA FIDE EXECU- 3 TIVE, ADMINISTRATIVE, OR PROFESSIONAL 4 EMPLOYEES. 5 Section 13(a)(1) of the Fair Labor Standards Act of 6 1938 (29 U.S.C. 213), as amended in section 3(a)(1), is 7 further amended— 8 (1) by striking ‘‘of a retail or service establish- 9 ment shall not’’ and inserting ‘‘shall’’; 10 (2) by striking ‘‘because of’’ and all that follows 11 through ‘‘administrative activities,’’; 12 (3) by striking ‘‘less than 40’’ and inserting 13 ‘‘not less than 20’’; and 14 (4) by striking ‘‘such activities’’ and inserting 15 ‘‘activities not directly or closely related to the per- 16 formance of executive or administrative activities’’. 17 SEC. 5. EFFECTIVE DATE. 18 This Act, and the amendments made by this Act, 19 shall take effect on the first day of the third month that 20 begins after the date of enactment of this Act. 21 Æ VerDate Sep 11 2014 21:29 Apr 07, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6301 E:\BILLS\S1041.IS S1041 pbinns on DSKJLVW7X2PROD with $$_JOB

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