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The U.S. Department of Labor's Update on Overtime

Sammons Capture.JPGSince 2015, the U.S. Department of Labor has been working to update the minimum wage and the "white collar" exemption under the Fair Labor Standards Act (FLSA). The effective new minimum salary level for the "white collar" exemption was to be raised as of December 1, 2016, from $23,660.00 per annum to $47,892.00 per annum, in what has been called the Overtime Final Rule. This left those employees who did not meet the minimum salary threshold as potentially qualifying for overtime pay. While employers frantically evaluated how these changes would affect their bottom line, a federal district judge in Texas granted a nationwide emergency preliminary injunction that prohibited the U.S. Department of Labor from enforcing the Overtime Final Rule. The case went up to the Fifth Circuit Court of Appeals, where in 2016 a stay was put in place while the U.S. Department of Labor considered formulating a new rule.

Fast forward to March 7, 2019. Now, the U.S. Department of Labor has proposed a new rule that increases the number of American employees who are eligible for overtime. Under this new version, the proposed minimum salary level for the "white collar" exemption is $35,308.00 per annum. This modest increase is likely made in response to arguments that the Overtime Final Rule had set the minimum salary required for exempt status so high that a large number of individuals that Congress had meant to exempt from the overtime pay requirement were now considered nonexempt, and therefore entitled to receive overtime pay. Coupled with this are a number of other changes, such as increasing the total annual compensation requirement for "highly compensated employees" from $100,000 to $147,414 per annum, and periodic reviews to update the minimum salary threshold for an employee to qualify as exempt status.

All that being said, some salient provisions have remain unchanged, e.g. overtime protections for police officers, fire fighters, paramedics/nurses, non-management production-line employees, and non-management employees in a number of other fields, such as maintenance, construction, carpenters, electricians, mechanics, plumbers, iron workers, and other similar occupations. The job duties test, i.e., whether an employee's job responsibilities and role within the employer's organization fall within one of seven classes of potentially exempt workers, is also unaffected by this new rule.

So where do things go from here? The U.S. Department of Labor's Notice of Proposed Rulemaking has been published by the Office of the Federal Register. The proposed rule itself entitled "Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees", and is open for public comment until May 21, 2019. Some of the comments received thus far make the following suggestions:

  • Providing employers who do not employ workers for the full 12-month period with another methodology to calculate salary.
  • Applying overtime requirements to small businesses/mom & pop establishments.
  • Allowing higher education administrators to include room and board as compensation for the salary threshold
  • Allowing the employer to include the value of employee benefits as compensation for the salary threshold

The complete text of the proposed rule can be found at https://www.regulations.gov, when searching for RIN 1235-AA20.

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