NACS: New Overtime Rule Could Negatively Impact Small Businesses

A raised threshold will potentially extend overtime protections to millions of previously exempt salaried employees.
PAYROLL word on blue binder placed on weekly time sheet for overtime

WASHINGTON, D.C. — A new U.S. Department of Labor (DOL) rule increasing the salary threshold for mandatory overtime could have unintended impacts on small operators and their employees, according to NACS.

Effective July 1, the salary threshold for overtime protection will increase to the equivalent of an annual salary of $43,888 before increasing to $58,656 on Jan. 1, 2025. 

[Read more: Fuel Retailers Call for Application Standardization for Federal EV Funding Program]

The July increase updates the present annual salary threshold of $35,568 based on the methodology used by the prior administration in the 2019 overtime rule update. On Jan. 1, 2025, the rule's new methodology takes effect, resulting in the additional increase. The rule will also adjust the threshold for highly compensated employees. 

Advertisement - article continues below

Starting July 1, 2027, salary thresholds will update every three years by applying up-to-date wage data to determine the new levels.

The Biden-Harris Administration stated the new rules will expand overtime protections to certain salaried executive, administrative or professional employees who were not previously covered by federal overtime pay requirements. 

"This rule will restore the promise to workers that if you work more than 40 hours in a week, you should be paid more for that time," said DOL Acting Secretary Julie Su. "Too often, lower-paid salaried workers are doing the same job as their hourly counterparts but are spending more time away from their families for no additional pay. That is unacceptable. The Biden-Harris Administration is following through on our promise to raise the bar for workers who help lay the foundation for our economic prosperity."

[Read more: NACS Joins Challenge to New Joint Employer Rule]

However, NACS expressed concern over the effect the new requirements would have on store managers and assistant managers. In November 2023, the association filed comments regarding the Fair Labor Standards Act and opposed the increase.

"We are disappointed that the Department of Labor did not listen to the reality of the problems its overtime proposal will cause," said Doug Kantor, general counsel at NACS. "By dramatically changing the law and treating every market in the country as if they are the same, the Department of Labor is doing a disservice to employees and small businesses alike. The rule will reduce employees' flexibility and its costs will fuel inflation. It is even worse for businesses and their employees than the one that the courts struck down in 2017. We expect that the rule announced today will be challenged and overturned as well."

Despite the trepidation, NACS positively acknowledged the two-tiered delay, which it believes will alleviate some of the potential burdens the rule will have on employers.

This ad will auto-close in 10 seconds