For approximately the past three (3) years, employers have been caught in a maelstrom between two shifting currents. One current consisted of Department of Labor (“DOL”) rulemaking, which proposed to increase the salary threshold for the executive/administrative/professional exemption (the “white-collar exemption”) under the Fair Labor Standards Act. The countervailing current consisted of federal court rulings striking down those new rules. This turmoil has left some employers in a confused state, like a log-canoe being tossed around in a tidal strait. Some employers prepared for the December 1, 2016 effective date of the Obama-era DOL rule, which would have increased the salary level to qualify for the white-collar exemption from $455/week ($23,600/year) to $913/week ($47,476/year), by notifying their employees about adjustments to their pay rates and/or classifications. Ironically, those employers that did nothing to prepare for the December 1, 2016 rule change may have been relieved to hear of the nationwide injunction issued on Nov. 22, 2016 by a federal judge in Texas, which blocked the Obama-era DOL rule approximately one (1) week before it was set to take effect.
On March 7, 2019, the current shifted decisively in another direction, as the Trump DOL issued a notice of proposed rulemaking to revise the federal overtime regulations once again. Specifically, the DOL proposal would increase the salary level to $679/week ($35,308/year) and above that overtime eligibility will be based on the usual job duties test for the EAP exemption. The proposal also includes an increase to the level of compensation to qualify as a “highly compensated employee” from $100,000 to $147,414 per year, a commitment to periodic reviews to update the salary threshold following more notice-and-comment rulemaking, and the ability to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10% of the standard salary level. The proposed rule would not change the job duties test and would not impose automatic adjustments to the salary threshold. The Department of Labor estimates that more than one million Americans could be eligible for overtime under the new rule. Additionally, on March 29, 2019, the Department of Labor issued a notice of proposed rulemaking to propose clarifications to how an employee’s “regular rate of pay” is calculated for the purposes of determining their overtime rate at one-and-a-half times their regular rate.
Although the current federal (and state) overtime regulations are still in effect, what can you do to prepare for the impact this new rule might have on your business?
- Assess your employee classifications: You may need to reclassify workers by either transitioning exempt workers to non-exempt status or make salary adjustments to fit within the white-collar exemption if and when the rule takes effect. Also keep in mind the effect that reclassification might have on your employees besides their pay (i.e., scheduling, leave, flexibility, productivity, and tracking hours).
- Go beyond the basics: How the rule might affect workers with a non-traditional schedule or who travel frequently? How can a new proposal for including bonuses/incentives be leveraged for your workforce? Is there any room to shift job duties within your company?
- Review your current policies and procedures: You should have a handbook that spells out the policies and procedures of your company, including compliance with federal and state wage and hour laws. Identify the sections of those policies that may need to be changed to comply with any new laws and consult with legal counsel to make those changes.
- Pay attention to the shifting tides: While the nationwide injunction put a hold on the Obama-era rule, the litigation continued in the 5th Circuit through the change in administrations and the 2020 election is already on the horizon. Additionally, any proposed rule might be subject to further litigation.
- Submit a comment: On March 22, 2019, the Department of Labor opened up the proposed rule to public comment. The comment period for the overtime exemption rulemaking closes on May 21, 2019. You may find more information about submitting a comment on the DOL website here: https://www.dol.gov/newsroom/releases/whd/whd20190322. The comment period for the “regular rate” rulemaking closes on May 29, 2019. You may find more information about submitting a comment on the DOL website here: https://www.dol.gov/whd/overtime/regularrate2019.htm.
Adam E. Konstas is an Attorney in PK Law’s Employment and Education Group. He represents private sector employers, local school boards, superintendents, private schools and colleges before federal and state courts, and federal and state civil rights agencies on a variety of matters, including employment discrimination litigation, teacher and student discipline, collective bargaining, and sexual harassment. Mr. Konstas can be reached at 410-339-5786 or firstname.lastname@example.org.