The American Institute of CPAs (AICPA) sent a comment letter to the Department of Labor (DOL) on September 3 regarding the DOL's proposed rule on overtime, which was issued over the summer. The AICPA expressed its appreciation for the DOL’s efforts to ensure the regulations governing overtime pay reflect the evolving workplace and economy, but voiced concern “that the DOL’s proposed rule will increase the administrative burden in complying with the regulations while dramatically increasing employers’ payroll costs.” The proposed changes would radically increase the thresholds for overtime rules, unreasonably expanding the number of employees eligible for overtime pay.
Under the Fair Labor Standards Act (FLSA), employees must be paid overtime for any hours worked over a 40 hour work week. The FLSA contains exemptions from overtime pay for employees in executive, administrative, professional, outside sales and certain computer-related jobs. To be considered exempt, employees also have to meet certain tests based on their duties, “the duties test,” and be paid at least $455 per week.
The proposed rule would increase the standard salary level exemption from $455 per week to $970 per week or an annual wage of $50,440. To compare, the annual salary level is currently $23,660. The rule would additionally increase the highly compensated employee (HCE) threshold from an annual salary of $100,000 to $122,148. Both changes would increase the number of employees eligible for overtime pay.
The net effect is, these proposed changes will likely force employers to look internally for cost-saving measures. While most accounting firms would struggle to absorb additional payroll expectations, the proposed changes would have a particularly significant negative impact on smaller accounting firms and firms in certain geographic regions, like rural areas, where income rates tend to be lower. Ultimately, the proposed DOL rule could impact major business decisions like hiring, expansion, offering new benefits or more flexible work arrangements for employees, and possibly even require reductions at firms and companies.
The AICPA letter was one of over 5,500 comments submitted on the DOL’s proposed rule.