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DOL’s Overtime Rule: Second Time’s the Charm?

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Employers….you can stop holding your breath.

The Department of Labor’s (DOL) Notice of Proposed Rulemaking (NPRM) promises to update the employer rules on overtime pay to certain employees.

The FLSA Overtime Mandate

The Fair Labor Standards Act (FLSA) mandates virtually all employers to pay employees time-and-a-half if their work week exceeds 40 hours but provides an exemption for bona fide executive, administrative and professional workers who meet a duties and salary test. Thresholds for these rules were established in 2004.

History of DOL’s Attempt to Update the Rule

The Obama Administration directs the DOL to update the existing rule recognizing the need to keep pace with the rise in worker’s salaries since 2004. The DOL responds issuing a new final rule on May 18, 2016.

The release of the controversial increase to the Fair Labor Standards Act’s (FLSA) overtime salary thresholds, set to go into effect December 1, 2016, was enough to cause employer’s serious concern. A number of states and business associations agree that while an increase is appropriate, the DOL’s proposal is far from modest. They contend that the adjustment eligibility hinges solely on salary level and not on the type of work. The result: significant and unsustainable cost to employers. A federal judge, agreeing with these concerns, granted an injunction on November 22, 2016, halting its implementation.

Subsequently, the DOL opens up the final rule to public commentary mid-2017 gathering information necessary to address the original concerns of the lawsuit and draft a new rule. Synthesizing all the information, the DOL’s fall 2018 announcement expresses the Department’s intent to propose new rules in early 2019.

Attempt to Update the Rule – Take 2

On March 7, the DOL and the Administration post the NPRM sharing the summary of the new provisions. The DOL anticipates that this rule will result in an additional 1.3 million more Americans eligible for overtime.

The chart below shows a comparison of the current rule next to both the 2016 and 2019 proposals.

Category

Current

May 2016 Rule (Vacated)

March 2019 Notice of Proposed Rule

Standard Salary Level • $455 weekly
• $23,660 annually
• $913 weekly
• 40th percentile of full-time salaried workers in the lowest-wage Census region (currently the South)
• $679 weekly
• $35,308 annually
HCE Total Annual Compensation Requirement $100,000 annually • $134,004 annually
• 90th percentile of full-time salaried workers nationally
• $147,414 annually
• 90th percentile of full-time salaried workers nationally
Automatic Adjusting None Every 3 years, maintaining the standard salary level at the 40th percentile of full-time salaried workers in the lowest-wage Census region, and the HCE total annual compensation level at the 90th percentile of full-time salaried workers nationally. Commitment to periodic review with notice and comments periods
Bonuses No provision to count nondiscretionary bonuses and commissions toward the standard salary level Up to 10% of standard salary level can come from non-discretionary bonuses, incentive payments, and commissions, paid at least quarterly. Up to 10% of standard salary level can come from non-discretionary bonuses, incentive payments, and commissions, paid at least quarterly.

Additionally, these new rules will not apply to certain types of work and workers. These are:

  • Police Officers
  • Firefighters
  • Paramedics
  • Nurses
  • Laborers including: non-management production-line employees
  • Non-management employees in maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, and other construction workers

Employer Action

  • Employers need not comply at this time since this is merely a notice and not the actual final rule
  • The NPRM is with the Office of Management and Budget (OMB) for review
  • Once the OMB releases the rule and publishes it in the Federal Register, the public will have 60 days to provide commentary
  • Upon completion of the commentary period, the DOL will review and address all of the comments and issue either a final rule with a future implementation date, an interim rule requesting more information with another period of commentary, or a combination of the two
  • In the interim, employers must still follow existing overtime rules governing minimum wage and overtime pay

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Resource

Click here to view the Notice of Proposed Rulemaking: Overtime Update

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