New US Overtime Rule Proposal Would Raise Salary Threshold to $35k

New US Overtime Rule Proposal Would Raise Salary Threshold to $35k

The US Department of Labor unveiled its new proposal for updating overtime regulations last Thursday, offering a version of the rule that would expand overtime eligibility to more employees, but millions fewer than the one the Obama administration attempted to enact in 2016. The proposed rule raises the salary threshold at which executive, administrative, or professional employees become exempt from overtime requirements from $23,660 to $35,308: higher than many businesses expected but a far cry from the $913 per week, or $47,476 per year, set by the previous administration, Proskauer attorney Allan Bloom notes in a blog post summarizing the finer points of the proposal. Up to 10 percent of that minimum can be satisfied through non-discretionary bonuses, incentives, or commissions, or through “catch-up” payments made at the end of the year, which effectively reduces the weekly minimum further.

Another exemption for highly compensated employees would increase from $100,000 to $147,414, which is actually higher than the Obama administration’s threshold of $134,004. The new proposed figure equates to the 90th percentile of full-time salaried workers nationally, projected forward to 2020. Employees are exempt from overtime if they meet this higher level of compensation as long as they are primarily engaged in office work and regularly perform at least one of the duties of an executive, administrative or professional employee. If the proposed rule comes into force as written, employers of workers who are no longer exempt based on their level of compensation will have to decide whether to pay them overtime or bump their salaries up over the threshold. “Paying overtime on $125,000 per year is a huge economic burden, but it still may be less expensive than going to the new level,” Seyfarth Shaw attorney Alexander Passantino tells Lisa Nagele-Piazza at SHRM.

One feature of the Obama-era rule, subsequently struck down by a federal judge in 2017 before coming into effect, to which employers objected was its scheme for automatically increasing the threshold every three years based on inflation. This was intended to ensure that lack of legislative or regulatory action did not result in an outdated minimum: The threshold had not been updated since 2004, which was the first change since 1975. The new proposal does not include automatic increases. Instead, the notice of proposed rule-making expresses the department’s “intention to propose updates to the earnings thresholds every four years. This would provide clarity and help workers and employers by having a regular and orderly process for future changes.”

The new proposal also does not change the duties tests for overtime eligibility, Ryan Mick, an attorney with Dorsey & Whitney in Minneapolis, tells SHRM’s Allen Smith, which “would have required many employers to undertake a far more complex analysis to determine exempt status for many employees.” Still, it may be a good time for employers to make sure their exempt employees meet the existing criteria:

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US Labor Department to Propose New Overtime Rule Early Next Year

US Labor Department to Propose New Overtime Rule Early Next Year

In its latest regulatory agenda, the US Department of Labor announced its intent to issue a Notice of Proposed Rulemaking for a new overtime salary threshold sometime next January. The Trump administration had first signaled its interest in rewriting the overtime rule last July, when the Justice Department expressed that intent in a court filing and the Labor Department issued a request for comments from the public—the first step in the federal government’s rulemaking process.

A new overtime rule issued by the Obama administration in 2016 raised the salary threshold at which employees are exempt from overtime pay from $23,660 to $47,476, but was blocked from going into effect by the courts and ultimately overturned by a federal judge in Texas last September, who found that the department had erred in setting the new rules for overtime eligibility based on salaries alone and not job descriptions.

The Labor Department appealed that judgment, not because it intends to maintain the previous administration’s rule, but rather out of concern that the ruling would hinder its ability to rewrite it. Current Labor Secretary Alexander Acosta had been critical of his predecessor’s decision to raise the threshold dramatically, indicating in his confirmation hearing last year that he thought an increase was needed but that doubling it all at once would put undue stress on the economy.

Employers may have hoped for a slightly speedier regulatory process, SHRM’s Lisa Nagele-Piazza reports, but now can likely expect a final new rule within two years, giving them plenty of time to prepare for what will probably be a less onerous new standard than the Obama administration’s:

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Pennsylvania Governor Seeks to Raise Overtime Salary Threshold

Pennsylvania Governor Seeks to Raise Overtime Salary Threshold

Pennsylvania Governor Tom Wolf announced earlier this month that he had directed labor regulators to devise a plan to clarify the duties test in the state’s overtime regulations and raise the salary threshold at which employees become exempt from overtime, the Pittsburgh Post-Gazette’s Daniel Moore reported:

The proposal, which expands overtime in phases over three years, would raise the amount that certain salaried employees can earn and still qualify for overtime pay. Beginning Jan. 1, 2020, the state would raise the salary limit to $31,720, or $610 per week. The threshold will increase to $39,832 on Jan. 1, 2021, followed by $47,892 in 2022, which the Wolf administration estimates will extend overtime eligibility to up to 460,000 workers.

But the proposal’s future could hinge on the outcome of the gubernatorial election, as Gov. Wolf faces multiple Republican challengers in a re-election battle this year. The governor has unsuccessfully pressed the legislature to pass an increase in the minimum wage, which sits at $7.25 an hour, the lowest allowed by federal standards.

The Pennsylvania Department of Labor & Industry is expected to publish an initial proposal for public comments in March. Wolf’s proposal is similar to the new overtime rule the Obama administration attempted to enact in 2016, which was set to abruptly raise the overtime salary threshold from $23,660 to $47,476 until a federal judge invalidated it last August.

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Labor Department to Appeal Judgment Against Obama-Era Overtime Rule

Labor Department to Appeal Judgment Against Obama-Era Overtime Rule

The US Labor Department will appeal a ruling handed down by a federal judge in Texas earlier this year, striking down the controversial new overtime rule put in place by the previous administration, the Washington Examiner reports:

The department will ask that the district court’s August ruling by stayed while it establishes a new overtime rule. The Trump administration is still expected to significantly scale back the rule.

Labor Secretary Alexander Acosta has repeatedly said that the Obama administration went too far when it expanded the rule, which extended overtime eligibility to an estimated 4 million more workers, but also that the rule itself was nevertheless in need of updating. He has suggested that a more moderate expansion would be appropriate.

A drawn-out court process could extend the duration of the uncertainty employers are currently facing as to the future of this regulation. Labor Secretary Alexander Acosta, appointed by President Donald Trump in March, has indeed been a critic of the Obama administration’s rule, which would have more than doubled the overtime salary threshold from $23,660 to $47,476. Before the judgment handed down in August, the Trump Administration signaled that it planned to rewrite the rule and Acosta’s department began the process of doing so with a solicitation of public comments in July.

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Overtime Rule’s Uncertain Future Still Leaves Employers ‘in Limbo’

Overtime Rule’s Uncertain Future Still Leaves Employers ‘in Limbo’

The new overtime rule proposed by the Obama administration last year, which would have increased the overtime salary threshold from $23,660 to $47,476, currently looks very unlikely to come into effect in its original form. A federal judge in Texas struck the rule down in September, finding that the Labor Department had erred in setting the new rules for overtime eligibility based on salaries alone and not job descriptions. Meanwhile, the department’s new leadership under Labor Secretary Alexander Acosta has signaled that it would rewrite the rule to make it less burdensome to employers, issuing a request for comments in July as it began a process of reviewing the regulation.

Nonetheless, policymakers, including Acosta himself, agree that the overtime threshold is overdue for some kind of increase, and most observers believe the Labor Department is likely to adopt a new rule that raises the threshold less dramatically, either through incremental increases or different salary tests depending on location, company size, or type of role.

Employers who had hoped to rest easy after the Obama-era rule was held up in court still face an uncertain change in regulation in the coming year, including the possibility that Acosta chooses to appeal the ruling against the 2016 rule. Erin Mulvaney discusses that uncertainty at the National Law Journal:

“Employers have been left in limbo,” said Lori Brown, president and chief operating officer of Compliance HR at a webinar this week that highlighted issues about the overtime rule. “It’s an ever-changing compliance dilemma.” …

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Federal Judge Strikes Down US Overtime Rule

Federal Judge Strikes Down US Overtime Rule

After a year of controversy, litigation, and delays, the new overtime rule created by the US Department of Labor under the Obama administration last year has now been thoroughly defeated. US District Judge Amos Mazzant, who issued a preliminary injunction last November blocking the rule from coming into effect as scheduled in December 2016, has issued a final ruling and struck the rule down entirely, finding that the Labor Department erred in setting the new rules for overtime eligibility based on salaries alone and not job descriptions, The Hill reported late Thursday:

The judge’s ruling was celebrated by industry groups, including the Restaurant Law Center, which represents the restaurant industry. In a statement to The Hill, the group said the Obama administration “overstepped its authority.”

“The Department of Labor under the previous administration overstepped its authority in making changes to the federal overtime rule. Today’s decision to invalidate the rule demonstrates the negative impacts these regulations would have had on businesses and their workers. We will continue to work with [the Department of Labor] on behalf of the restaurant industry to ensure workable changes to the overtime rule are enacted,” the group said in a statement.

To some extent, Mazzant’s ruling is redundant, as the Trump administration had already announced that it was rewriting the rule and issued a request for public comments as a first step toward amending it. The decision will put some constraints on that rewrite, employment lawyer Eric B. Meyer tells HR Dive, but won’t prevent the Labor Department from updating the overtime salary threshold in the more restrained manner its current leadership envisions:

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Labor Department Issues Request for Comments on Overtime Rule

Labor Department Issues Request for Comments on Overtime Rule

The US Department of Labor has begun the process of revising or reversing the controversial new overtime rule enacted by the Obama administration last year, which would have raised the salary threshold at which employees are exempt from overtime pay from $23,660 to $47,476, but was held up in court before coming into effect. The Trump administration indicated earlier this month that it was planning to rewrite the rule, and on Tuesday, the Labor Department issued a request for information, soliciting public comments on the rule as a first step toward amending it, Reuters reported.

Specifically, the department is asking for input on whether and how to update the current salary threshold, or whether to eliminate the threshold entirely and base overtime eligibility solely on the “duties test.” It also wants to know how last year’s rule change and the injunction blocking it affected employers, many of whom raised salaries in anticipation of the rule and in some cases intend to keep those raises in place regardless of what happens in Washington. At TLNT, Seyfarth Shaw attorney Alex Passantino, a former acting administrator of the DOL’s Wage and Hour Division, provides a detailed overview of the questions included in the RFI, such as:

  • Should the 2004 salary test be updated based on inflation? If so, which measure of inflation?
  • Would duties test changes be necessary if the increase was based on inflation?
  • Should there be multiple salary levels in the regulations? Would differences in salary level based on employer size or locality be useful and/or viable?
  • Should the Department return to its pre-2004 standard of having different salary levels based on whether the exemption asserted was the executive/administrative vs. the professional?

The question of whether to differentiate salary thresholds by local cost of living is potentially the key innovation in the Trump administration’s proposed overhaul of the rule. Talking to SHRM’s Allen Smith, Passantino and other employment attorneys discuss how this might work—or indeed, whether it would work at all:

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