The U.S. Department of Labor announced a final rule on Tuesday that will revise regulations issued under the Fair Labor Standards Act to ensure overtime pay for some salaried and highly compensated employees. Critics say the rule could prove a significant burden for brokers operating small businesses.
Starting July 1, 2024, salaried employees making less than $844 per week – equivalent to $43,888 per year – will become eligible for overtime. On Jan. 1, 2025, the threshold to receive overtime pay will be raised for workers making less than $1,128 per week – equivalent to $58,656 per year.
Additionally, highly compensated employees (HCEs) will have their minimum salary threshold raised from $107,432 per year to $132,964 per year starting July 1, 2024. On Jan.1, 2025, this threshold for HCEs will increase again to $151,164 per year. The rule will continue to automatically update both salaried employee and HCE thresholds on July 1, 2027, and every three years thereafter.
The full unpublished rule, which is set to be published on Friday, states that employers can satisfy up to 10% of the new salary level through the payment of nondiscretionary bonuses and incentive payments (including commissions) paid annually or more frequently. The other 90% of overtime accumulated would have to be paid in regular fashion.
Alexandria, Virginia-based Transportation Intermediaries Association, an organization representing transportation intermediaries of all disciplines, released a statement on Tuesday arguing against the new rule as bad for small businesses.
“TIA’s membership is composed of 70% small businesses throughout the United States,” said Anne Reinke, president and CEO of TIA, in a press release. “Small businesses are the backbone of the American economy and the logistics industry. Under President Biden’s Department of Labor, we have seen several rules that will have major impacts on businesses, whether it be employee classification, overtime rules, or the attacks on the independent contractor status, small businesses are under attack. This will not just increase costs for small businesses but ultimately the consumers as well. The TIA will continue to advocate for our members and allowing our members to thrive without burdensome regulations.”
Reinke told FreightWaves that TIA will advise its members to be ready for the incoming changes and review their employee classification for every employee – adding that the TIA Labor Law Compliance Framework can help with that.
“Our members want to ensure that their employees are rightfully compensated for their time,” Reinke said in an emailed statement to FreightWaves. “But there are initial concerns with the drastic increases to the minimum limits so quickly – over 60% increase from the previous amount – and the inability of logistics companies to have the flexibility to structure compensation packages that are generous and enticing, with the amount of bonus and incentive amounts capped at 10% towards base salary. The industry is already feeling strapped financially as the freight market has been in a slump [for the] past two years. These increased costs will endanger many of these small businesses.”
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