Compensation, News

Comment Period Begins for Proposed Rule Changing OT Pay Threshold

Employers have until May 21 to make known their concerns about the U.S. Department of Labor’s (DOL) proposed rule that is expected to make more than a million more workers eligible for overtime pay.overtime

The DOL’s Notice of Proposed Rulemaking was published in the March 22 Federal Register. That publication opened a 60-day comment period that will close on May 21.

Under the new proposed rule, employees would have to earn at least $679 a week ($35,308 a year) to be exempt from overtime pay for any hours worked over 40 in a workweek. That’s up from the current $455 a week ($23,660 a year), the level that has been in place since 2004.

Under the Fair Labor Standards Act, employers can be exempt from overtime eligibility if they meet both the salary and duties tests. In addition to earning at least the threshold level of pay, they must perform duties that are executive, administrative, or professional in nature to be exempt from time-and-a-half pay for overtime hours.

Comments Accepted

The DOL is encouraging interested members of the public to submit comments about the proposed rule electronically at www.regulations.gov, in the rulemaking docket RIN 1235-AA20. More information about the proposed rule is available at www.dol.gov/whd/overtime2019.

Attorneys who have been following the effort to change the overtime rule encourage employers to make their concerns known by submitting comments.

“Tell them how it impacts your business, especially if the impact is negative,” Burton J. Fishman, senior counsel with Fortney & Scott, LLC in Washington, D.C., says. “Retail and hospitality are likely the most impacted, so tell the DOL how the rule should be modified to assist your business.”

Jamie A. LaPlante, an attorney with Porter Wright Morris & Arthur LLP in Columbus, Ohio, also urges employers to submit comments. She says employers should comment if they are in favor of the proposed threshold or if they think another level makes sense and why. Also, employers in favor of phasing in the new level over a period of time should suggest phase-in options.

The DOL is also seeking comments on a commitment to periodically review the salary threshold to keep it up to date. A review every four years has been discussed. There had been talk of building automatic updates tied to inflation into a new rule, but the proposed rule included no such provision and stipulates that any update would continue to require notice-and-comment rulemaking.

Fishman expects the plan to commit to periodic review will get a negative response from employers. “Economies and administrations change; few people in authority want to be committed to a course of action four years from now,” he says.

LaPlante says she hasn’t heard much reaction to the periodic update proposal, but “It seems to make sense, since it has been 15 years since the threshold was last updated in 2004. It also makes sense to have periodic updates because it makes the increases more gradual versus large increases that occur less often.”

When Might Rule Be Final?

Fishman expects the DOL to make the proposed rule final in early 2020—”60-day comment period, another 60 days to polish and publish, then a substantially delayed effective date to permit adjustments to assignments, payroll, etc.”

LaPlante also expects implementation before the end of 2020. She says the Trump administration’s goal is to get the rule in place before the 2020 election.

Proposed Rule’s History and Prospects

No matter when a rule becomes final, the effort to revise the pay threshold has been years in the making. The DOL issued a proposed rule during the Obama administration that would have raised the pay threshold to $913 a week ($47,476 a year). That proposal met severe opposition from employers and was struck down by a federal district judge in Texas shortly before it was to have taken effect on December 1, 2016.

The newly published proposed rule rescinds the previous version with a proposal likely much more acceptable to most employers than its predecessor. Fishman says the DOL “has not had many successes in the past two years,” but it may have hit “the sweet spot” with its new effort at changing the overtime rule. So, he urges employers “to examine their payrolls and assignments to see what adjustments they may have to make to minimize the impact of the new OT rule.”

“Some exempt employees may become nonexempt; others may get a raise,” Fishman says. “Many employers began this exercise when the Obama OT rule was published, so this will be somewhat familiar.”

Tammy Binford writes and edits news alerts and newsletter articles on labor and employment law topics for BLR web and print publications.