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 This was intended to ensure that lack of legislative or regulatory action did not result in an outdated minimum: The threshold had not been updated since 2004, which was the first change since 1975.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:

Read more

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:

Read more

Labor Department to Resume Supervised Settlements of Admitted Wage and Hour Violations

Labor Department to Resume Supervised Settlements of Admitted Wage and Hour Violations

The US Department of Labor’s Wage and Hour division announced last week that it would soon begin a six-month pilot of the Payroll Audit Independent Determination (PAID) program, which will give employers an avenue for resolving potential overtime and minimum wage violations under the Fair Labor Standards Act by self-auditing and voluntarily reporting these violations to the division:

This program will ensure that more employees receive back wages they are owed—faster. Employees will receive 100% of the back wages paid, without having to pay any litigation expenses or attorneys’ fees. The program requires employers to review WHD’s compliance assistance materials, carefully audit their pay practices, and agree to correct the pay practices at issue going forward. These requirements improve the employers’ compliance with their minimum wage and overtime obligations and further protect the rights of workers. …

It is purely the employee’s choice whether to accept the payment of back wages due, and employers are prohibited from retaliating against the employee for his or her choice. If the employee chooses to not accept the payment, the employee will not release any private right of action. Additionally, if the employee chooses to accept the payment, the employee will not grant a broad release of all potential claims under the FLSA. Rather, the releases are tailored to only the identified violations and time period for which the employer is paying the back wages.

Wage and hour disputes already being litigated or investigated by the Labor Department will not be eligible for resolution through the PAID program. Employers also cannot use the program to repeatedly resolve the same violation. The six-month pilot is expected to launch in April; once it concludes, the department will assess its effectiveness and decide whether to maintain it going forward.

Read more

South Korea Moves to Cut Maximum Workweek

South Korea Moves to Cut Maximum Workweek

Like some other East Asian economies, South Korea has long been known for a highly demanding work culture that rewards long hours and measures employees’ commitment by how much overtime they are willing to work. The country is one of the hardest-working in the OECD, with South Koreans working an average of 2,069 hours in 2016, compared to 1,783 hours in the US and just 1,363 hours in Germany. That may start to change in the coming years thanks to a bill approved by the National Assembly’s Environment and Labor Committee last Tuesday, which cuts the maximum statutory working hours from 68 hours a week to 52, the Korea Times reported:

Slashing working hours was among the main election pledges of President Moon Jae-in, which he said will improve quality of life as well as help create jobs. However, fewer working hours means higher labor costs for businesses. According to an estimate by the Korea Economic Research Institute, businesses will pay an additional 12.1 trillion won annually to maintain current production while cutting the working hours. This includes wages paid to additional workers hired to cover the hours lost, as well as their training costs.

Read more

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.

Read more

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.

Read more

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.” …

Read more