Following the U.S. Department of Labor’s announcement Tuesday that it’s set to finalize new overtime pay regulation, two key retail industry groups expressed concerns about their effect on retailers and their employees.
The new rule will raise the Fair Labor Standards Act’s minimum annual salary threshold for overtime pay eligibility. On July 1, the threshold rises from $35,568 to $43,888, affecting about a million workers, and on Jan. 1, 2025, it rises again to $58,656, affecting about 3 million. After that, starting July 1, 2027, the threshold automatically updates every three years based on current wage data.
For hourly workers, the requirement for overtime pay remains unchanged at one and one-half times the regular rate of pay, after 40 hours per workweek, with some exemptions if commissions are involved, according to the Labor Department.
In a statement this week, David French, executive vice president of government relations at the National Retail Federation, acknowledged the Labor Department’s effort to phase in the new rules, saying the “delay in full implementation of the new higher threshold, for example, will enable retailers to prepare for the full impact of the rule more thoroughly.”
“We remain concerned, however, that the new rules curtail retailers’ ability to offer the most flexible, generous and tailored benefits packages to lower-level exempt employees across the industry,” he also said.
Specifically, the rules will lead some employers to adjust compensation packages, which could cause some workers to lose flexibility in where and how they work (including working from home) or opportunities to travel or learn on the job; others who are currently managers may lose that status, according to the NRF.
In its statement this week, the group also objected to the automatic nature of future eligibility increases, saying that “exceeds the Department’s legal authority and oversteps longstanding Fair Labor Standards Act and Administrative Procedure Act principles.”
In November, during a period allotted to public comments on the proposed rules, the NRF similarly warned that “millions of retail managers will be demoted from exempt to non-exempt positions, causing those workers to lose significant employment benefits and risking the retail sector losing its future leaders.”
Retailers and restaurants employ nearly 60% of U.S. teenagers, the group said, and about 60% “of Americans have worked a retail job at some point in their careers,” and for nearly a third, “their first job was in the retail industry.”
“Many of the foundational work skills are learned through working retail jobs,” the NRF said. “As such, it is not uncommon for young, entry-level managers in the retail industry to earn salaries close to the minimum salary threshold. The Department’s proposed rule will force retailers to demote these workers and classify them as nonexempt, regardless of the worker’s preference.”
Also during the comment period, the NRF argued that, because the federal minimum hourly wage remains where it was last set at $7.25 in 2009, “there is no need to adjust the minimum salary threshold” for salaried workers.
In its own statement Tuesday, the Retail Industry Leaders Association similarly warned that people employed by retailers could be hurt by the new rules, saying the “industry offers individuals at all career stages an opportunity for flexibility, choice, and upward mobility,” but that the new regulation “serves to hinder growth and limit the very flexibility that workers want."
The group also challenged the legitimacy of the Labor Department’s method and approach.
“Retailers are concerned with the approach, the substance, and potential impacts of the DOL’s final overtime rule,” RILA said. “In pushing forward with a rule that rejects sensible comments from the nation’s largest employers and neglects the realities of today’s economy, the DOL takes an overzealous and unreasonable tack, favoring a controversial and legally dubious methodology to score political points.”
