National Aug 10, 2017

DOL plans to revisit overtime regulation

The U.S. Department of Labor finalized a regulation that would have updated the Fair Labor Standards Act’s overtime standard by raising the salary threshold under which an employee would be entitled to overtime to $47,476 from the current level of $23,660 last year. The regulation was supposed to go into effect on Dec. 1, 2016. Prior to the effective date, however, a U.S. district judge issued a nationwide preliminary injunction to prevent the DOL from implementing or enforcing the changes to the overtime regulation until the court issued a final ruling on the case. The DOL appealed this ruling to the Fifth Circuit Court of Appeals, but has since asked for repeated extensions on filing its brief in order to give the Trump administration time to consider what action to take.

On June 30, the DOL filed its brief in the appealed action. In its brief, the DOL argued that the district court erred in suggesting that the DOL could not include a minimum salary requirement in the overtime exemption test. At the same time, the DOL indicated that it would no longer advocate for the $47,476 figure that appears in the regulation and instead would undertake further rulemaking to determine what the salary level should be. In short, the DOL is suggesting it has the power to use a minimum salary requirement in the exemption test but feels now that the $47,476 is too high and will consider a lower salary figure.

The DOL filing of the brief did not come as a surprise. Three days prior to the filing, the DOL sent a formal request for information on the rule to the Office of Management and Budget. This request was approved, and the DOL published a Request for Information on July 26. This RFI allows the DOL to ask the public to comment on a number of questions that would help the DOL revise the regulation. In the RFI, the DOL acknowledges that many stakeholders felt the standard salary level of $46,476 was too high. The DOL determined that concerns expressed by various stakeholders after publication of the 2016 Final Rule that the salary level would adversely impact low-wage regions and industries have shown that additional rulemaking is needed.

Among the questions the DOL is seeking comment on are:

• Would updating the current salary level of $23,660 for inflation be an appropriate basis for setting the standard salary level and, if so, what measure of inflation should be used?
• Should the regulations contain multiple standard salary levels? If so, how should these levels be set: by size of employer, census region, census division, state, metropolitan statistical area or some other method?
• Should the DOL set different standard salary levels for the executive, administrative and professional exemptions?
• To what extent did employers, in anticipation of the 2016 final rule’s effective date on Dec. 1, 2016, increase salaries of exempt employees in order to retain their exempt status, decrease newly nonexempt employees’ hours or change their implicit hourly rates so that the total amount paid would remain the same, convert worker pay from salaries to hourly wages or make changes to workplace policies either to limit employee flexibility to work after normal work hours or to track work performed during those times?
• Would a test for exemption that relies solely on the duties performed by the employee without regard to the amount of salary paid by the employer be preferable to the current standard test?
• The 2016 final rule for the first time permitted nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary level. Is this an appropriate limit or should the regulations feature a different percentage cap? Is the amount of the standard salary level relevant in determining whether and to what extent such bonus payments should be credited?

The deadline for submissions is Monday, Sept. 25. In the meantime, it appears the overtime salary threshold will remain at $23,660 for the foreseeable future.