Last week, the US Department of Labor announced its Notice of Proposed Rule Making to update the country’s overtime rules. This proposal is significantly different from the Department’s 2016 rule making proposal which did not go into effect due to a court issued nationwide injunction.
The Ohio Chamber of Commerce along with numerous other business groups opposed the 2016 rule which would have made over 4.2 million employees earning a yearly salary of less than $50,440 eligible for overtime pay. The Ohio Chamber of Commerce submitted comments in opposition to that rule which highlighted the administrative burden on employers, the increased labor costs, and decreased schedule flexibility as the rule’s major drawbacks.
The new rule would make salaried employees earning less than $35,308 eligible for overtime pay if that employee works more than 40 hours in a given week. The current minimum salary level which was last changed in 2004 is $23,660 annually.
The Department of Labor’s News Release cited overwhelming agreement from comments they received from six in-person listening sessions held across the nation and their 2017 Request for Information as justification for the salary level increase. The Department also noted that they came to this new salary level by looking at what the 20th percentile salary level is for workers in the retail sector and the census region with the lowest wages.
The proposed salary level increase is expected to impact 1.1 million employees earning between $23,660 and $35,308. The proposal is also expected to have a direct cost to employers of $120 million per year for the first ten years. While the cost is significant, it is a decrease from the 2016 proposal which would have cost employers $344 million per year.
In addition to the salary level increase, the proposed rule also raises the annual compensation requirement for highly compensated employees from $100,000 to $147,414, which is expected to impact just over 200,000 employees.
The proposed rule makes no changes to the Department’s two other tests for determining exemptions to the Fair Labor Standards Act (FLSA), so the duties test and salary basis test remain intact with no administrative changes.
The Ohio Chamber of Commerce will be actively monitoring the proposed rule as it makes its way through the rule making process and we will seek input from our members at the next Labor and Employment Committee meeting on April 5th.
If you are interested in attending the Labor and Employment Committee you can reach me at: KShimp@Ohiochamber.com.