20 Mar New Law on the Radar: Overtime Rules
A couple of years ago, I freaked out some people when I started writing on changes made to overtime policies by the Department of Labor. After appropriately scaring everyone, it turned out that a federal judge in Texas gave several folks a big fat Christmas present by putting a nationwide injunction of the Obama Labor Department’s overtime rules which would have increased the minimum threshold for exempt salaries to nearly $52,000, which pretty much freaked everyone out. The court challenge to the previous rule under the Obama Administration was based in part on the salary level, in part on, and in part on the impact on state and local government employees. Ultimately, it was the automatic increase provisions which were deemed to be in violation of the Administrative Procedures Act.
At that time of the injunction, I told everyone there was a pretty good chance that future administrations would look at the overtime rule in hopes of decreasing the minimum threshold to somewhere in the mid-30’s. It’s been a very long time since the salary threshold has been raised.
Well not to pat myself on the pack too much…..
Last week, the Labor Department released a notice that it is preparing to issue a new regulation which would set the threshold for exempt staff to about $35,000. So, if this rule goes into effect, anyone making below $35,000 would be eligible for overtime pay. You can go back to previous posts to see what the old rule would have done, but it is looking the Labor Department learned its lesson from the previous effort. The new rules is likely one set of rules determining what is going to be the level at which employers could pay someone overtime based upon their salary. Then there will be a second rule proposed to address ways to automatically increase the salary threshold.
It is looking like the overtime level is going to be increased pretty soon. This report from Bloomberg states that the Labor Department is looking to have the regulation published, comments collected, and final enactment completed sometime in 2020. This would mean the rule would be solidified in the current administration so that future administrations could not come back and change it too easily.
The new salary threshold will be a significant increase, about $12,000, but correlates with economic trends.
What does this mean for employers?
- It is time to go back and make sure that your employees are properly classified. They should be classified as exempt or nonexempt employees, and you must make sure that they are properly classified as exempt.
- Take a look at job descriptions. Make sure what duties employees are performing is accurate. Take a look at employees’ daily functions – not just salary – and make sure they are eligible to be classified as exempt.
This is a good time to sit down with HR experts or an attorney and make sure all employees are properly classified. Please do not immediately start increasing pay because we need to see what the rule is and what the effective date of the rule is. Just because it is published does not mean it is fully implemented. We need to ensure we understand when the implementation happens before we start suggesting that folks start increasing salaries.
In the meantime, if you’re interested you can read the Bloomberg report here, and once the rule is published you can personally make your comments on the Department of Labor website. In the meantime, have fun!