Advocacy Recommends that the Labor Department Complete New Small Business Analysis for Overtime Regulations

On November 7, 2023, the Office of Advocacy (Advocacy) submitted comments on the United States Department of Labor’s proposed rule, Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees, 88 Fed. Reg. 62151 (Sept. 8, 2023) (PDF, 294 KB).

The Fair Labor Standards Act guarantees a minimum wage and overtime pay for most workers but provides for numerous exemptions. To qualify for the executive, administrative, and professional (EAP) exemption, employees must be paid on a salary basis, at a minimum salary level set by DOL, and their primary duty. This proposed rule will increase the minimum salary threshold for the EAP exemption from $35,568 to $55,068 annually. This threshold will be increased in the final rule, up to $60,209.

Advocacy believes that DOL’s Initial Regulatory Flexibility Analysis is deficient because it underestimates the economic impact of this rule on small entities. Small entities have commented that this rule will have detrimental impacts on their operations and increase their payroll. Small entities cannot afford these extra labor costs, as they face a difficult business environment post-pandemic including inflation, supply chain disruptions, shutdowns, and tighter labor markets. This rule may also have significant impacts on nonprofit organizations, which may have to cut services. This rule may also lead to unintended negative consequences for employees, such as limiting worker flexibility, lowering morale, and loss of benefits.

Advocacy recommended that DOL reassess the compliance costs in a Supplemental Regulatory Flexibility Analysis and consider significant alternatives that would accomplish the statute’s objectives while minimizing the economic impacts to small entities. Advocacy recommends that DOL adopt a lower salary level and seek public feedback before updating regulations in the future.

For more information, please contact Janis Reyes, Assistant Chief Counsel, at Janis.Reyes@sba.gov, or 202-798-5798.