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:

The Notice of Proposed Rulemaking was expected by October 2018, but the department recently said it will issue the proposal by January 2019. “Proposed regulatory actions are often delayed, so it would not be shocking for additional delay to occur,” said Jennifer Betts, an attorney with Ogletree Deakins in Pittsburgh.

“More delays are always possible, but I am hoping that DOL will meet that date so we can see a final rule early in 2020,” said Tammy McCutchen, an attorney with Littler in Washington, D.C.

So what will the new proposal look like? It’s hard to predict. It would be difficult for employers to prepare extensively right now, given how uncertain things are, Betts said. However, it would be wise over the next few months for employers to identify any employees who are classified as exempt but are paid below the $40,000 mark. “These are the individuals who will most likely be impacted by any change,” she said.

Meanwhile, Republican lawmakers have issued several proposals to change the overtime rule legislatively. These proposals include establishing a lower salary threshold than the one proposed by the Obama administration, phasing it in gradually over several years, a more flexible approach to the duties test, and giving organizations the option to offer employees “comp time” instead of overtime pay. These proposals, however, are fairly controversial topics for Congress to address in an election year, and might not garner enough Democratic support to pass the Senate anyway.