A final rule from the U.S. Department of Labor (DOL) will expand the number of employees eligible for overtime pay.
While ASTA expects legal challenges to the rule, which could delay its entry into force on July 1, there are steps travel agencies can take now to ensure compliance.
The DOL rule increases the salary threshold for guaranteed overtime pay. Currently at $35,568, that number is scheduled to rise to $43,888 on July 1st and to $58,656 on January 1st.
The first adjustment in July is based on the 20th percentile of weekly earnings of full-time wage 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 limits every three years using current salary 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 overall.
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 the 2024 rule is based on. 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 that the 2016 rule raised legal challenges, Lobasso believes it is likely that the 2024 rule will as well. And if that happens, an injunction will likely be ordered.
Meanwhile, Lobasso advised agencies to take steps to comply with the 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 limit doesn’t mean you can treat them as exempt,” he said.
So, owners should analyze employee salaries. Those who have employees close to the $43,888 threshold may 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, the owner might consider restructuring, Lobasso said.
“There are certainly ways to make creative adjustments without it actually affecting your bottom line,” he said.
For example, there are ways to assert that certain employees cannot work overtime. However, Lobasso noted, this 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 the overtime rules. ASTA lobbied for the exemption for years and got it in 2020.
“Essentially, it means that regardless of someone’s job duties, i.e., even if they don’t qualify for so-called white collar exemptions, if you are paying that employee at least one and a half times the applicable minimum wage – which we read as meaning the state minimum wage, because many states have more than the federal minimum wage – plus more than 50% of total compensation coming in the form of commissions, that person can be treated as exempt,” Lobasso said.
He called this potentially a “very useful workaround.”
