Friday, March 8, 2019
CLIENT ALERT - NEW OVERTIME PAY RULES PROPOSED, AT LAST
After years of debate and waiting, the USDOL has issued its newly-proposed overtime rules. The USDOL has released a rule that, if adopted, will set a minimum salary for the OT exemption at $679 per week or annually at $35,308 per year. The increase to these levels represents a substantial increase from current law but also a marked departure from the previous proposals made by the Obama administration. What’s also significant is what the proposal does not include: 1) automatic update/increase provision; and 2) revised duties test for the raised threshold. Many were concerned that the threshold would become inflated through automatic increases.
The proposed rule will be published in the Federal Register and public comments will be submitted during the sixty (60) day period following publication of the proposal. A final rule will not be expected for many months, and perhaps in 2020.
The essence of the proposed rule:
- The proposed minimum salary threshold will be raised from $455 per week to $679 per week, which is $35,308 on an annual basis;
- Without regard to which exemption, what industry, or any geographic location, there will be one minimum salary threshold (some exceptions are carried forward, but there are no new exceptions);
- The highly compensated employee exemption will have a proposed annual salary entry level of $147,414;
- The duties tests for the exemptions have not been modified; and
- The salary minimum has no automatic increases or decreases.
The background of this proposal is intertwined with the occupant of the White House. For decades we have had public debate over the longstanding and undeniably low minimum thresholds for eligibility for OT exemptions. When legislative solutions escaped the Obama administration, in May 2016 with an effective date of December 2016, it implemented rules increasing the minimums from $23,660 per year to $47,476 per year—more than double. Shortly before the implementation of the Obama rule, a federal court in Texas issued an injunction preventing the Obama rule from taking effect. Then, in 2017, with the Trump DOL saying it would not seek to apply the Obama rule, the federal court struck down the Obama rule once and for all. Since then, we have been waiting for the expected increase in the minimum.
Employers that may be affected by a final rule should review the proposed rule and begin tracking various data sets using these numbers to anticipate how a final rule, if implemented consistent with the proposed rule, would affect their workforce and payroll. We advise against making any changes to payroll practices based on the proposed rule. Doing so would be premature.
DOL will be accepting public comments, and employers with an opinion about the rule are encouraged to submit one. Once the proposed rule has been formally published, anyone may submit a public comment using the online portal here, and entering the Regulatory Information Number (RIN) for this proposed rule: 1235-AA20. The deadline to submit comments will be 60 days from the date the rule is published in the Federal Register, which will be no later than next week. Note that the Federal Register website will not accept public comment on this rule until after the rule is published.
A link to DOL’s information page on the proposed rule is here.