On June 30, 2015, the Wage and Hour Division of the U.S. Department of Labor (DOL) released a proposed rule to update overtime regulations under the Fair Labor Standards Act (FLSA). Specifically, the proposal will update the definition that determines which white collar workers are eligible to receive overtime pay.

Currently, employees who earn an annual salary of at least $23,660 are exempt from overtime pay requirements under FLSA. The proposed rule will raise the salary threshold and extend overtime pay to employees who earn less than $50,440 a year in 2016. The DOL estimates that this expansion will affect around 5 million workers within the first year of its implementation.

Importantly, the proposal also includes provisions to automatically update the salary threshold based on inflation or wage growth over time.

While the DOL suggests that the proposed rule will provide greater clarity for employees and employers in order to determine who should receive overtime pay, these changes will have a significant impact on employers across all industries. Employers will need to examine employee classifications and determine which employees will no longer be considered exempt under the new rule.

The proposal will be published in the Federal Register, at which time interested parties – including employers – will be invited to submit comments to help shape the final rule. For more information and to read the proposal, visit the DOL’s website.