On March 14, 2016, the Department of Labor (“DOL”) submitted its overtime rule, entitled “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees,” to the White House Office of Management and Budget (OMB) for final review. This came as a surprise to many who anticipated that the rule would not make any significant movement before summer of 2016. It appears that the DOL wants to avoid the possibility of having the rule killed after the impending presidential election.
The proposed rule entitles employees who earn less than $50,440 annually to overtime pay under the Fair Labor Standards Act (“FLSA”). Under the current FLSA regulations, employees who earn less than $23,660 annually are entitled to overtime pay. The rule also increases the threshold for the “highly compensated employees” exemption from $100,000 to $122,148 annually. Given the recent submission of the rule to OBM for review, this significant payroll change could affect all employers sooner than expected.
In a February 9, 2016 letter to Secretary of Labor Tom Perez, several members of Congress asserted that the new rule would suddenly make nearly 5 million employees eligible for overtime pay. The letter further indicated that the increase in the overtime salary threshold “would place a large burden on business owners and their workers . . . .” While the regulation does not require congressional approval, Congress has the power under the Congressional Review Act to challenge the rule within 60 legislative days of the date the DOL finalizes it. The President has the power to veto or sign a joint resolution invalidating the rule, which is why time is of the essence. The results of the imminent election may affect passage of the rule. Now that the rule has traction, all employers should track the status of the rule and prepare to adjust their payrolls to comply.
Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.
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