Employers will get the opportunity to offer feedback on changes to the regulation governing which workers are eligible for overtime pay after the U.S. Department of Labor (DOL) publishes a Request for Information (RFI) in the Federal Register on July 26.
On July 25, the DOL announced it would publish the RFI and released a preliminary copy. The RFI is the latest action on a rule issued in May 2016 during the Obama administration. Implementation of the rule would have added approximately 4.2 million employees to the ranks of workers eligible for overtime pay of at least 1½ times their regular rate of pay for hours worked in excess of 40 in a workweek.
The rule hasn’t taken effect because of a federal court injunction. In June, the DOL announced that it had decided not to defend the rule in court.
The rule, as issued in 2016, more than doubles the current minimum salary workers must earn to be exempt from the Fair Labor Standards Act (FLSA). Being exempt from the FLSA makes workers ineligible to collect overtime pay, even when they work more than 40 hours in a workweek. The current threshold is $23,660 a year ($455 a week). The new rule puts the threshold at $47,476 a year ($913 a week).
To determine whether an employee can be classified as exempt, both her salary and her duties are considered. In addition to meeting the minimum salary threshold, a worker must perform duties that are primarily executive, administrative, or professional. The 2016 rule immediately triggered opposition from employers, which maintained that the salary test change was too drastic.
What to expect now
“We may be back at square one on revisions to the overtime rule,” says Mark B. Wiletsky, a contributor to Colorado Employment Law Letter and attorney in the Boulder, Colorado, office of Holland & Hart LLP. In publishing the RFI, “the DOL essentially starts the whole process of revising the overtime rule again. It suggests that the rule in its current form is unlikely to go into effect.”
Wiletsky says Labor Secretary Alexander Acosta has indicated that the DOL isn’t opposed to raising the minimum salary level for the white-collar exemptions. Instead, the opposition is to raising the salary level as high as it’s set in the 2016 rule.
The DOL may seek to simplify the exemption tests and offer employers more time to comply with the changes, Wiletsky says.
Reggie Gay, a contributor to South Carolina Employment Law Letter and attorney with the McNair Law Firm in Greenville, South Carolina, says the new development on the overtime rule likely means that employers can expect an increase in the minimum salary threshold but not as much as under the 2016 rule.
“It has been a considerable period of time since the last increase, and in fairness[,] an increase is overdue,” Gay says. “This being said, the increase should be reasonable and not overly burdensome on employers.”
One of the questions the DOL asks in the RFI concerns whether the salary threshold should be automatically updated on a periodic basis. Gay says such an adjustment may be appropriate. “This could be based on something similar to Social Security adjustments, and, if it is every three years or so, it will enable an employer to plan and budget,” he says. He said that in addition to changes in the salary test, the duties test should be updated to conform with modern-day forms of employment.
The text of the RFI traces the history of the salary test and explains that for more than 75 years, the law has interpreted exempt employees to be workers whose job primarily involves executive, administrative, or professional duties. Since the FLSA became law in 1938, the minimum salary level for exempt employees has been updated as salary levels have increased. The current $455-per-week level has been in effect since 2004.
The RFI seeks comments on 11 questions. One question asks for comments on whether updating the 2004 salary level for inflation is an appropriate basis for setting a standard salary level. The question also asks what measure of inflation commenters think should be used.
Another question asks for comments on whether the regulation should contain multiple standard salary levels and, if so, how the levels should be set—for example, by employer size, census region, census division, state, metropolitan statistical area, or another method.
Another question asks whether the DOL should set different standard salary levels for the executive, administrative, and professional exemptions and, if so, whether there should be a lower salary for executive and administrative employees. The RFI also asks whether the standard salary level in the 2016 rule effectively eclipses the role of the duties test in determining exempt status.
Further, the RFI seeks information from employers that increased the salaries of exempt employees in anticipation of the 2016 rule taking effect. It asks what actions were taken and what impact they have had.
Another question asks if relying solely on a duties test—and not considering salary at all—would be preferable to the current system, which considers an employee’s duties and pay. During his confirmation hearing in March, Acosta questioned whether a salary test is even appropriate under the law.