Department of Labor Proposes Overtime Salary Threshold Change

On August 30, 2023, the Department of Labor (DOL) proposed a rule which would increase the minimum salary for the “white collar” overtime exemption to $55,068 annually. Under the new rule, DOL would also automatically update earnings thresholds every three years.

In Maine, the overtime threshold is currently $41,401 (which is higher than the federal threshold), and changes annually with each minimum wage increase. Starting January 1, 2024, it will be $42,450.20. If DOL institutes this rule change, employers in Maine would need to follow the higher standard (see below for details.)

How does the overtime exemption work?

The Fair Labor Standards Act (FSLA) requires employers, including nonprofits, to pay their employees at least $7.25 per hour and to pay employees one-and-one-half times their regular rate of pay when they work more than 40 hours in a workweek.

Employees are currently exempt from the FLSA overtime pay requirement if they:

1. Are paid on a salary basis (meaning they are paid the same amount each week regardless of how many hours they actually work); and
2. The salary exceeds a certain salary threshold ($35,568 per year is the federal baseline; in Maine it is $41,401, and it increases annually); and
3. Exercise job duties that are classified as tests for administrative, executive, and professional.

What is DOL proposing?

The proposed new rule would raise the federal salary threshold for exempt employees to $1,059 per week ($55,068 per year). The proposed regulations make no changes to the duties tests for administrative, executive, and professional employees. 

Note that Maine already exceeds the current federal threshold of $35,568, and has considered state legislative changes that would further increase that minimum. If the federal salary threshold were set at a rate that exceeded Maine's, employers in Maine would need to follow the higher standard.

DOL is also proposing to automatically update earnings thresholds every three years. In Maine, the salary threshold currently changes annually with the minimum wage.

The Labor Department is also proposing raising the minimum salary level for “highly compensated employees” from $107,432/year to nearly $144,000/year (though this exemption is not applicable under Maine law).

What are the implications for nonprofits?

The effect of the proposed overtime regulations, if implemented, would vary widely among nonprofit organizations. 

If the rule were to take effect, this would mean that nonprofits with exempt employees in Maine with salaries between the Maine salary threshold (currently $41,401) and the proposed federal salary threshold (currently proposed at $55,068 per year) would need to either a) increase these workers’ salaries or b) pay them one-and-one-half times their regular rate of pay when they work more than 40 hours in a workweek.

Actions You Can Take

• We encourage all charitable nonprofits to consider filing public comments (by November 7th) after conducting a mission-based analysis of how the proposed increases in the minimum salary levels would affect operations, resources, staffing, and equity, as well as what impact the draft regulations would have on people relying on the services and the mission of the nonprofit.
• Attend a Small Business Association Office of Advocacy Roundtable on the topic. Dates are September 26th and 27th from 1-3pm. To sign up for one of the Roundtables, e-mail Janis.Reyes@sba.gov
• Ensure that your organization is in compliance with the current federal and state rules regarding the overtime exemption. You can sign up to attend a "Wage and Hour Compliance Assistance" course with the Maine Department of Labor on October 11 or October 18.
• Read the Maine DOL FAQs about Overtime Rule Changes which contains many useful insights.

What's Next?

After DOL receives and reviews these comments, it could make some changes to the proposed regulations before issuing final regulations. It is likely that the new salary threshold will ultimately take effect sometime in 2024.

Thank you to the National Council of Nonprofits and the North Carolina Center for Nonprofits for their support in drafting this blog post.