New OT Regulations Proposed by The Department of Labor

DOL Proposes New Overtime Regulations

The Department of Labor (DOL) announced June 30, 2015, a highly anticipated proposed rule under the Fair Labor Standards Act (FLSA) that would extend overtime protections to nearly 5 million white-collar workers.

Workers who earn as much as $970 a week—$50,440 a year—would have to be paid overtime even if they’re classified as a manager or professional, according to the announcement.

Under current regulations, the salary threshold remains at $23,660 ($455 per week), which is below the poverty threshold for a family of four, and only 8 percent of full-time salaried workers fall below it, according to a fact sheet issued by the Obama administration.

Here are some highlights from the DOL’s proposed changes:

●        Significant Impact.

Employees and employers across every industry and sector will be impacted. Most employers covered by the FLSA will need to analyze employee classifications and make other changes, by a likely 2016 effective date that will be established in the final rule. According to DOL, 11 million employees will be impacted.

●        Salary Level Will Increase.

To be exempt currently, workers must make more than $455/week ($23,660 annually). The proposed rule sets the standard salary level at the 40th percentile of weekly earnings for full-time salaried workers, which for 2013 was $921 per week, or $47,892 annually. If the 40th percentile approach is adopted, the 2016 level is projected to be $970 a week, or $50,440 annually. This will impact all sectors, but it may disproportionately affect the non-profit and service sector industries as well as certain geographic areas of the country.

●        Changes to Highly Compensated Employees (HCEs).

The department is proposing to set the HCE annual compensation level equal to the 90th percentile of earnings for full-time salaried workers ($122,148 annually), or based on changes in inflation. Currently, in order to fall under this exemption an employee must earn at least $100,000.

●        For the First Time, DOL Proposes to Automatically Raise the Salary Level.

The Department is proposing to automatically update the salary level (including for highly compensated employees) on an annual basis, either based on percentiles of earnings for full-time salaried workers or based on changes in inflation.

●        Feedback Sought on Duties Test and Nondiscretionary Bonuses.

While no changes have been proposed yet, the regulation acknowledges challenges associated with the duties test and seeks additional examples regarding specific occupations. Similarly, the department wants to hear from employers about the possibility of including nondiscretionary bonuses to satisfy a portion of the standard salary requirement.

The Notice of Proposed Rulemaking (NPRM) was published on July 6, 2015 in the Federal Register.  Interested parties are invited to submit written comments on the proposed rule at www.regulations.gov on or before September 4, 2015. The DOL will review all comments, then draft a final rule and submit it for interagency review.  This process can take nine to twelve months.  Additional information concerning this NPRM can be found on the DOL website.

(DOL website, SHRM website)