The U.S. Department of Labor’s (DOL) Wage and Hour Division (WHD) officially sent its notice of proposed rulemaking (NPRM) to revise the Part 541 regulations to the Office of Information and Regulatory Affairs (OIRA) of the Office of Management and Budget (OMB) for review. The OIRA website states that it received the Part 541 NPRM on January 16, 2019, and that the proposal is “economically significant.” At this juncture, it is not known what the Part 541 NPRM contains or how long OIRA will take to review the proposed rule before it can be returned to the DOL for publication in the Federal Register.
OIRA conducts a review of most regulatory proposals pursuant to Executive Order 12866, which was passed on September 30, 1993, and its predecessor, Executive Order 12291. This review is intended to promote consistency in regulatory initiatives, coordinate regulatory policy, and offer objective analysis of regulations. OIRA must conduct a review of significant regulatory actions. An economically significant regulatory action is one that is likely to have “an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities.” Agencies are required to provide an analysis and quantification of the costs and benefits of an economically significant regulatory action, as well as an analysis of reasonable, feasible alternatives. While OIRA has no minimum period to review a regulation, Executive Order 12866 caps the review time at 90 days. The OMB director may extend the review period of a regulatory action on a one-time basis for no more than 30 days—a head of the rulemaking agency may extend the review period indefinitely.
As a reminder, the Part 541 regulations define the various tests to classify employees as exempt from the Fair Labor Standards Act’s (FLSA) minimum wage and overtime requirements. Exempt employees must be employed in a bona fide executive, administrative, professional (including computer professional), or outside sales capacity. In addition, exempt employees must be paid a salary that meets or exceeds the salary threshold.
This proposed rulemaking was preceded by a series of listening sessions conducted by the WHD in various cities across the United States from August 2018 to October 2018, seeking input on a number of questions about the overtime rule. Also, in 2017, under Secretary of Labor Alexander Acosta, the WHD published a request for information (RFI) in the Federal Register in which it asked questions regarding the appropriate salary level (or levels) and duties tests for the Part 541 overtime exemptions. This NPRM will address the comments received by the WHD.
The effort to revise the Part 541 regulations started in the Obama administration when the WHD published its first proposed rule in the Federal Register on July 6, 2015, which was then followed by a final rule. The final regulations were published on May 18, 2016, and were scheduled to go into effect on December 1, 2016. However, a federal district judge in Texas enjoined the final rule on a nationwide basis, prohibiting it from going into effect. That case has been on appeal to the Fifth Circuit Court of Appeals and is currently being held in abeyance to give the DOL the opportunity to conduct new rulemaking. Had the 2016 regulations become effective, the minimum salary requirement for the FLSA’s Part 541 overtime exemptions would have doubled from $455 per week to $913 per week; annualized, that would have resulted in an increase in the salary threshold from $23,660 per year to $47,476 per year. As of now, we do not know what changes the DOL has included in the revised Part 541 regulations.