Punching In: DOL’s Overtime Update Impact Varies State by State

Monday morning musings for workplace watchers.

Overtime Threshold Geography|EEOC Commissioner Outlook

Rebecca Rainey: How difficult is it to comply with the US Labor Department’s new overtime rule? Depends on where you are.

Employers in states with their own overtime rules on the books are likely not having to make as drastic a change to their payroll and scheduling in the wake of the DOL’s new overtime rule going into effect earlier this month, attorneys say.

The rule released by the Biden administration in April tweaked an exemption to overtime pay requirements under the federal Fair Labor Standards Act so that more workers would qualify for time-and-a-half pay when they work more than 40 hours a week.

The “white collar exemption” from overtime pay applies to salaried workers in “executive, administrative, and professional” positions who earn more than a certain amount each year.

The July 1 rule change made it so that workers earning less than $43,888 per year, or $844 per week, would be eligible for overtime premium pay, a bump from the previous level of $684 per week or $35,568 per year.

The update to the salary threshold is expected to make one million workers newly eligible for overtime pay, according to estimates from the DOL. In response, employers are expected to either give workers raises so that they remain exempt or pay the overtime premium.

However, how much those raises pay out varies by state.

According to a Bloomberg Law analysis of state overtime laws, there are currently five states that have broader overtime eligibility than what the federal DOL offers. Workers making less than $1,302.40 weekly in Washington, $1,124.20 - $1,200 a week in New York , $5,546.67 monthly in California, $938.40 weekly in Alaska, and $1,057.69 a week in Colorado are typically eligible for overtime pay. In those states, the new July 1 threshold of $844 a week will have little impact because employers there are already subject to a higher threshold under state law.

In the New York tri-state area, “I don’t think the Fed level that’s going into effect is going to be a life changer for those places, I think they were already living with it,” said Anthony Rainone, a co-chair of the labor and employment practice at Brach Eichler LLC in New Jersey.

Wisconsin and Maine had overtime pay requirements that were higher than what the DOL required prior to the July 1 increase, so employers there still have to make some adjustments to their compensation structures—but not the 23% percent increase businesses are facing in the other 45 states.

Some multi-state employers may not be making many changes yet, though. Rainone said it’s not uncommon for employers operating in more than one state to make a cost of living adjustment for employees living in more expensive areas. Others may not treat those employees differently at all, meaning some may already be offering salaries that are close to or above the exemption’s new threshold.

Jane Jacobs, a partner at Tarter Krinsky & Drogin LLP, cautions that offering compensation based on location can create tension among employees, who are likely to find out about differences in pay.

“If you’ve got employees doing the exact same thing as an employee in another location, and one’s making a great deal more, that’s a problem,” she said.

Far more employers are expected to have to make changes ahead of the rule’s second phase set to take effect Jan. 1, which would make it so workers earning less than $1,128 per week or $58,656 per year qualify for overtime pay. An estimated 3.4 million workers would newly qualify for overtime premium pay under that change, according to the DOL.

After the Jan. 1 change takes place, only three states—California, Washington, and parts of New York—would require overtime coverage that goes beyond the protections provided at the federal level. Management-side lobbying groups, a small business, and the state of Texas have sued to block the overtime rule from going into effect. But so far, only Texas was able to convince a federal judge to freeze its implementation for employees of the state.

Lilah Burke: The vacancy left by outgoing Republican EEOC Commissioner Keith Sonderling may not be filled for some time.

Sonderling announced last week that he plans to leave his role at the Equal Employment Opportunity Commission at the end of August. His term as commissioner expired July 1, but officials are given 60 days to stay on if the president hasn’t put forth a new nominee. Sonderling said he plans to return to private practice.

The Republican commissioner’s departure won’t significantly swing the direction of the commission, agency observers said. Democrats hold three spots on the five-member panel, constituting a majority with or without Sonderling.

But the empty Republican seat could give Chair Charlotte Burrows an easier time managing the panel, said Victoria Lipnic, former acting chair of the commission and currently a partner at Resolution Economics.

“Dems have an even strengthened majority,” Lipnic said. “It’s just one less person you’re negotiating with.”

And Democrats could enjoy that dynamic for quite a while before there’s a nomination.

The position must be filled by a Republican. Typically, the White House will pick from names submitted by the Senate minority leadership—in this case Sen. Mitch McConnell (R-Ky.).

But Republicans have little reason to rush, said Larry Lorber, labor and employment counsel at Seyfarth Shaw. If all commissioners stay until the end of their terms, Democrats will maintain their majority until 2026, and the looming election opens the possibility of Republicans retaking the White House and Senate.

“There’s no reason to rush an appointment through now,” Lorber said. “If the Republicans win the Senate I would imagine they would be much less constrained as to who they would want the seat to be filled by.”

Practically speaking, there’s also not much time for the Senate to confirm someone before the election, said Lorber, who directed the Office of Federal Contract Compliance Programs in the 1970s.

“They’re not going to waste committee time or floor time on this nomination,” he said.

If Sonderling’s seat sits empty for months, it wouldn’t be the first time. Kalpana Kotagal, a current Democratic commissioner, waited more than a year between her nomination in April 2022 and her confirmation in July 2023, after she met pushback in the Senate.

And a Republican seat on the National Labor Relations Board has gone unfilled since December 2022. McConnell blamed Democrats this past December for that delay, but Sen. Lisa Murkowski (R-Alaska) told Bloomberg Law at the time that it was her party that didn’t put forth a name. Biden nominated Joshua Ditelberg to the position in May.

Senators have also said they prefer to “package” nominees, to confirm one from each party. That might be tough with the soon-to-be-empty seat, however, as the commissioner with the next expiring term is Andrea Lucas, a Republican. The next Democrat to hit a term limit will be vice chair Jocelyn Samuels in 2026.

When it comes to criteria Republicans will have for their nominee, stances toward diversity, equity, and inclusion initiatives at major companies are likely to be part of that conversation, Lipnic said. Some Republicans have pushed for the EEOC to fight against such programs.

“DEI will be a potential litmus test for someone to fill this Republican seat at the EEOC,” she said.

When discussing Sonderling’s impact during his time on the commission, Lipnic highlighted his focus on artificial intelligence.

“He deserves a lot of credit not just for making that a signature issue of his, but really doing the work to understand, ‘What is the technology? How is the technology being used?’” she said.

But Sonderling was limited in what he could accomplish, Lorber said, because he was in the minority for the entirety of his one term.

“It’s really hard for a minority commissioner to influence what the agency does,” he said.

We’re punching out. Daily Labor Report subscribers, please check in for updates during the week, and feel free to reach out to us.