Possibility Of New Overtime Regulations. What Are They And How Could They Impact Your Business?

April 10, 2016

On March 13, 2014, President Obama signed a Presidential Memorandum directing the US Department of Labor to update its regulations regarding overtime pay for white-collar workers. The Department of Labor did so in July 2015 when it proposed revisions to the regulations governing which executive, administrative, and professional employees are entitled to the Fair Labor Standards Act’s (“FLSA”) minimum wage and overtime pay protections.

The Proposed Changes Are:

  1. Setting the minimum salary level required for full-time salaried workers at $970 per week, or $50,440 annually (an increase from the current $455 per week, or $23,660 annually),
  2. Increasing the total annual compensation required to exempt highly compensated employees to $122,148 annually (an increase from the current $100,000 annually); and
  3. Establishing a mechanism for automatically updating the salary and compensation levels going forward to ensure that they will continue to provide a useful and effective test for exemption.

After the proposal came out, the public had an opportunity to comment on the new regulations until September 4, 2015. The Department of Labor received more than 270,000 comments. The volume of comments may hint in itself at the hardships employers could face due to these potential changes. However, the comments themselves were mixed.  Many employers noted their approval regarding the proposed regulations. However, many other commenters pointed out potential flaws including (1) the proposed increases do not take into consideration the unique needs of different industries, (2) a rigid duties test would run counter to the realities of the modern workplace, and (3) pay fluctuations in various geographic regions would have a disproportionately negative impact on employers in states with a lower cost of living.

Now, employers are in a holding pattern as they wait to see what the Department of Labor decides to do in its final revised regulations. The new regulations likely will be released in mid-to-late 2016 and will go into effect in 2017. The upcoming presidential election may have an effect on these rules, as well. Delays in the rule revision process have accrued and, with the overwhelming response to the request for public comments, it is likely that the decision will be published shortly before the November election. Both sides of the aisle have opinions on these rules which may lead to the current administration choosing to delay or speed up the release, based on public opinion polls. However, nothing is certain until the final revised rules are announced.

So what can or should employers do in the meantime? Employers of all shapes and sizes, from all industries, should review their job descriptions to determine whether they accurately reflect their employees’ job duties and the skills necessary to perform each job. Employers should pay close attention to the duties necessary to fall within the various overtime exemptions. Employers also should identify those employees in exempt positions who currently fall near or below the proposed salary threshold of $970 per week, as well as those who currently fall under the “highly compensated” exemption. Last, employers should consider determining a plan of action for complying with the new regulations as well as a plan to communicate these changes to employees. Rock Fusco & Connelly’s Labor and Employment attorneys are available to assist employers in preparing for these anticipated changes.