A final rule from the U.S. Department of Labor (DOL) will expand the number of employees who are eligible for overtime pay.
While ASTA expects legal challenges to the rule, which could delay it from taking effect on July 1, there are steps travel agencies can take now to ensure they comply.
The DOL’s rule raises the salary threshold for guaranteed overtime pay. Currently at $35,568, that number is scheduled to rise to $43,888 on July 1 and to $58,656 on Jan. 1.
The first adjustment in July is based on the 20th percentile of weekly earnings of full-time salaried workers in the lowest-wage census region. Starting in January, adjustments are based on the 35th percentile. The DOL also included a provision to update the thresholds every three years using current wage data.
ASTA general counsel Peter Lobasso said small agencies will “bear the brunt” of the new regulations, as small agencies tend to offer lower starting salaries in general.
The new overtime rule is similar to one the DOL issued in 2016 under the Obama administration, Lobasso said. The difference: The 2016 rule was based on the 40th percentile of salaried workers, compared to the 35th percentile that the 2024 rule is based upon. The 2016 rule was blocked by a federal judge.
The Trump administration was not in favor of the regulation, Lobasso said, and it essentially died at that point.
Considering the 2016 rule elicited legal challenges, Lobasso believes it’s likely that the 2024 rule will, too. And, if that happens, an injunction would likely be ordered.
In the meantime, Lobasso advised agencies to take steps to comply with new regulations.
First, he said, agency owners should review worker classifications, ensuring that salaried employees are not performing duties that would make them eligible for overtime pay.
“It’s very important to note that just because you pay someone over the threshold does not mean you can treat that person as exempt,” he said.
Then, owners should look at employee salaries. Those who have employees close to the $43,888 threshold might want to give them a raise. Lobasso called it “the path of least resistance.”
But if an employee’s salary is substantially below the new threshold, an owner might think about restructuring, Lobasso said.
“There are certainly ways that you can creatively adjust without it really affecting your bottom line,” he said.
For instance, there are ways to state that certain employees cannot work any overtime. Though, Lobasso noted, that could impact customer service. It’s a matter of “balance,” he said.
Agencies could also consider that as long as they meet the definition of a retail establishment and other criteria, they can claim exemption from overtime rules. ASTA had lobbied for the exemption for years, and got it in 2020.
“Essentially, it means that regardless of someone’s job duties, meaning even if they don’t qualify for the so-called white-collar exemptions, if you’re paying that employee at least one and a half times the applicable minimum wage — which we read to mean the minimum wage of the state, because many states have more than the federal minimum wage — as well as more than 50% of the overall compensation coming in the form of commissions, that person can be treated as exempt,” Lobasso said.
He called it potentially a “very useful workaround.”