On May 18th the U.S. Department of Labor (DOL) published its final rule which more than doubles the salary an employee must be paid before being considered exempt from overtime under the “white-collar” exemptions. The previous salary threshold was $455 per week, $23,660 annually. As of December 1, 2016, the new threshold will be $913 per week, $47,476 annually. It is projected that this will affect at least 134,000 workers in Ohio and more than 4.2 million workers nationally. Further, the new rule provides for automatic increases every three years. The chart below shows the current regulations, the regulations that were in the notice of proposed rulemaking (NPRM), and what is in the final rule.
The Fair Labor Standards Act (FLSA) requires businesses to pay employees time-and-a-half for hours worked in excess of 40 in a workweek unless certain exemptions apply. This rule change affects the administrative, executive, and professional exemptions, also known as the “white-collar” exemptions. Under these white-collar exemptions, if an employee performs certain duties and is paid in excess of the minimum threshold, the employee is exempt from overtime. With this significant increase in the minimum threshold, employers will be left with the tough choice of bumping employees above the threshold or reclassifying their employees to non-exempt status. The latter many times also means a reclassification from salary to hourly in order to properly track hours and know when overtime is due.
Now that the rules have been released, there are a few, albeit unlikely, ways to stop implementation. First, there are two federal bills titled the “Protecting Workplace Advancement and Opportunity Act” (S. 2707 / H.R. 4773) that have been introduced in both chambers of Congress. This legislation would prevent the DOL’s proposed overtime regulation from taking effect and details the circumstances for proposing a new overtime rule. The only other hope is to see whether the rule will be challenged in court or by Congress under the Congressional Review Act (under which Congress can disapprove the rule, but the disapproval can be vetoed by the president), and whether any such challenge will be successful. In any event, employers should start evaluating their operations to be prepared by the December 1st deadline.
For additional information on this topic, please see the articles below:
DOL Site on Final Rule
Overview & Summary of Final Rule
Q & A on Final Rule
DOL Fact Sheet on Final Rule
DOL Fact Sheet for Non-Profits
DOL Business Guidance for Private Employers