Overtime Update: DOL Signals Changes to the FLSA and White Collar Exemptions may be Coming Soon

by Obermayer Rebmann Maxwell & Hippel LLP
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For the past few years, HR legalist has been following the Department of Labor’s proposed overtime rule, which would have roughly doubled the salary threshold under which employees are guaranteed overtime pay, and made millions of additional employees eligible for time-and-a-half overtime for hours worked over 40 per week.  Last fall, that rule was blocked by a federal court in Texas just weeks before it was scheduled to take effect on December 1, 2016.  In the final months of the Obama administration, the DOL filed an appeal with the Fifth Circuit Court of Appeals, seeking to reinstate the rule.  During the past few weeks, the DOL, under new Secretary of Labor Alexander Acosta, revealed that it plans to propose a new rule in the future.

During confirmation hearings, Secretary Acosta stated that he might support an increase of the salary threshold, which was set at $23,660 in 2004, to account for inflation since that time. On June 27, 2017, the DOL sent a request for information about the overtime rule to the Office of Management of Budget.  While the details of the request are not yet public, the request indicates that the rulemaking process may begin soon.  In a brief filed in the Fifth Circuit on June 30, 2017, government lawyers stated that the DOL had decided not to defend the salary threshold set under the 2016 rule, but that it would pursue separate rulemaking to set a new salary level.  The government also defended its authority to set a salary threshold for overtime, which had been called into question by the Texas court.  The brief also indicated that the DOL would wait to issue a formal notice of rulemaking until the pending appeal was resolved.  During an interview with Bloomberg on July 7, 2017, Secretary Acosta stated that “the salary level does need to change, in my opinion.”

These latest developments are a signal to employers that, once the ongoing appeal before the Fifth Circuit is resolved, changes to the salary level may be on the way through a new round of rulemaking. According to the Department of Labor’s CPI inflation calculator, an adjustment to the rule to account for inflation from 2004 to 2017 would result in a new threshold of just over $30,000.  At that salary level, the potential impact on employers would be smaller, compared to the approximately four million employees who would have become eligible for overtime under the proposed 2016 threshold ($47,476).  This is because many employees making $30,000 or less do not perform the executive, administrative or professional duties required to be classified as “white collar” employees exempt from overtime.

Any potential new rule would first have to go through the rulemaking process, including notice of a new proposed rule, and the opportunity for employers, employees, and their advocates to submit comments to the DOL. HR Legalist will continue to track the progress of the pending appeal before the Fifth Circuit, as well as any potential new rule contemplated by the DOL, so that employers can prepare for any potential changes.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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