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)
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