S1041-118

2. Findings Congress finds the following: The Fair Labor Standards Act of 1938 (29 U.S.C. 201 et seq.) established overtime compensation requirements for certain employees when they work more than 40 hours in a given workweek. Under section 13(a)(1) of such Act, Congress delegated to the Secretary of Labor the authority to define and delimit the terms relating to the exemption for bona fide executive, administrative, and professional employees (commonly known as the white-collar exemption). For more than 75 years, the Secretary of Labor has exercised the Secretary's delegated authority to issue regulations that define and delimit the terms relating to the white-collar exemption by applying a duties test and applying a minimum compensation level (or salary threshold). The Secretary of Labor began utilizing a salary threshold in the initial regulations defining and delimiting the terms relating to the white-collar exemption, which were first issued in 1938. Congress has long approved the use of a salary threshold by the Secretary of Labor, as demonstrated by the fact that Congress has amended the Fair Labor Standards Act of 1938 at least 10 times since 1938 and has not precluded the Secretary from using a salary threshold. The salary threshold became woefully out of date and ineffective as a result of not being sufficiently updated to keep pace with the changing economy, as evidenced by the fact that 63 percent of all full-time salaried workers were guaranteed overtime pay under section 7 of the Fair Labor Standards Act of 1938 based on their salaries in 1975 while, in 2022, less than 15 percent of all full-time salaried workers are guaranteed such overtime pay under the overtime rule promulgated on September 27, 2019. Weak overtime protections also hurt the many workers who are forced into part-time jobs but need full-time jobs to support themselves and their families. When employers can no longer overwork employees who are exempt from overtime pay because of lax standards, they will be forced to spread work and hours across their workforce. Restoring overtime protections is especially important in 2023, as the economy of the United States is still recovering from the pandemic and many workers report their employers demanding excessive hours. In 2015, when the Department of Labor proposed an increase to the overtime salary threshold rule under the Obama Administration, it found that the historic range of the overtime salary threshold under the Fair Labor Standards Act of 1938 ran from approximately the 35th to the 55th percentile of weekly earnings for all full-time salaried workers. By phasing the overtime salary threshold back up to the 55th percentile of earnings of full-time salaried workers nationally—which after adjusting for inflation is projected to translate to an annualized amount of $73,551 in 2021 and $82,745 by 2026 (roughly the level of the boldest State overtime threshold increase)—the United States can restore overtime protections to historic levels.

3. Minimum salary threshold for bona fide executive, administrative, and professional employees exempt from Federal overtime compensation requirements Section 13 of the Fair Labor Standards Act of 1938 (29 U.S.C. 213) is amended— in subsection (a)(1)— by inserting subsection (k) and after subject to; and by inserting (except as provided under subsection (k)(2)(C)) after Administrative Procedure Act; and by adding at the end the following: Beginning on the effective date of the Restoring Overtime Pay Act of 2023, the Secretary shall require that an employee described in subsection (a)(1), as a requirement for exemption under such subsection, be compensated on a salary basis, or equivalent fee basis, within the meaning of such terms in subpart G of part 541 of title 29, Code of Federal Regulations (or any successor regulation), at a rate per week that is not less than the weekly rate of the applicable annualized salary threshold under paragraph (2). Subject to subparagraphs (B) and (C), the applicable annualized salary threshold shall be— $45,000, beginning on the effective date of the Restoring Overtime Pay Act of 2023; $55,000, beginning on January 1, 2024; $65,000, beginning on January 1, 2025; $75,000, beginning on January 1, 2026; and beginning on January 1, 2027, an annualized amount that is equal to the rate of the 55th percentile of weekly earnings of full-time salaried workers nationally, as determined by the Bureau of Labor Statistics based on data from the second quarter of 2026. The Secretary may establish, through notice and comment rulemaking under section 553 of title 5, United States Code, a salary threshold that is a rate that— is greater than the applicable annualized salary threshold under subparagraph (A); and is calculated based on a data set and methodology established by the Secretary that are capable of being updated in accordance with subparagraph (C). Not later than 1 year after the salary threshold first takes effect under subparagraph (A)(v), and annually thereafter, or, in the case in which the Secretary establishes an increased salary threshold under subparagraph (B), annually after establishing such increased salary threshold, the Secretary shall update the rate of the salary threshold in effect under subparagraph (A)(v) or (B), as applicable, so that such rate is equal to— in the case in which the Secretary does not establish an increased salary threshold under subparagraph (B), the 55th percentile of weekly earnings of full-time salaried workers nationally, as determined by the Bureau of Labor Statistics based on data from the second quarter of the calendar year preceding the calendar year in which such updated amount is to take effect; and in the case in which the Secretary establishes an increased salary threshold under subparagraph (B), the greater of— the 55th percentile described in subclause (I); and the increased salary threshold established under subparagraph (B), as updated in accordance with the data set and methodology established by the Secretary under subparagraph (B)(ii). Section 553 of title 5, United States Code, shall not apply to any update described in this subparagraph. Not later than 60 days before a revised salary threshold under this paragraph takes effect, the Secretary shall publish a notice announcing the amount in the Federal Register and on the internet website of the Department of Labor. Not later than 21 days after the end of each calendar quarter, the Bureau of Labor Statistics shall publish on its public website, for each week of such quarter, data on the weekly earnings of full-time salaried workers by census region (as designated by the Bureau of the Census). (k)Minimum salary threshold(1)In generalBeginning on the effective date of the Restoring Overtime Pay Act of 2023, the Secretary shall require that an employee described in subsection (a)(1), as a requirement for exemption under such subsection, be compensated on a salary basis, or equivalent fee basis, within the meaning of such terms in subpart G of part 541 of title 29, Code of Federal Regulations (or any successor regulation), at a rate per week that is not less than the weekly rate of the applicable annualized salary threshold under paragraph (2).(2)Salary threshold(A)In generalSubject to subparagraphs (B) and (C), the applicable annualized salary threshold shall be—(i)$45,000, beginning on the effective date of the Restoring Overtime Pay Act of 2023;(ii)$55,000, beginning on January 1, 2024;(iii)$65,000, beginning on January 1, 2025;(iv)$75,000, beginning on January 1, 2026; and(v)beginning on January 1, 2027, an annualized amount that is equal to the rate of the 55th percentile of weekly earnings of full-time salaried workers nationally, as determined by the Bureau of Labor Statistics based on data from the second quarter of 2026.(B)Increased thresholdThe Secretary may establish, through notice and comment rulemaking under section 553 of title 5, United States Code, a salary threshold that is a rate that—(i)is greater than the applicable annualized salary threshold under subparagraph (A); and(ii)is calculated based on a data set and methodology established by the Secretary that are capable of being updated in accordance with subparagraph (C).(C)Automatic updates(i)In generalNot later than 1 year after the salary threshold first takes effect under subparagraph (A)(v), and annually thereafter, or, in the case in which the Secretary establishes an increased salary threshold under subparagraph (B), annually after establishing such increased salary threshold, the Secretary shall update the rate of the salary threshold in effect under subparagraph (A)(v) or (B), as applicable, so that such rate is equal to—(I)in the case in which the Secretary does not establish an increased salary threshold under subparagraph (B), the 55th percentile of weekly earnings of full-time salaried workers nationally, as determined by the Bureau of Labor Statistics based on data from the second quarter of the calendar year preceding the calendar year in which such updated amount is to take effect; and(II)in the case in which the Secretary establishes an increased salary threshold under subparagraph (B), the greater of—(aa)the 55th percentile described in subclause (I); and(bb)the increased salary threshold established under subparagraph (B), as updated in accordance with the data set and methodology established by the Secretary under subparagraph (B)(ii).(ii)Nonapplicability of rulemakingSection 553 of title 5, United States Code, shall not apply to any update described in this subparagraph.(D)Notice requirementNot later than 60 days before a revised salary threshold under this paragraph takes effect, the Secretary shall publish a notice announcing the amount in the Federal Register and on the internet website of the Department of Labor..