The recent Department of Labor proposal could mean that millions of Americans will qualify for overtime in the near future. Yesterday, the DoL proposed an update to the 2004 overtime eligibility threshold. The original ruling stated that employees working more than 40 hours per week were eligible for overtime if they earned $455 per week ($23,660 per year). The updated proposal seeks to bump up the salary requirements to $679 per week ($35,308 per year).
Mark J. Swerdlin, partner at law firm Shawe Rosenthal LLP, says that he has been following this issue for some time now–back to the Obama administration’s proposal, which sought to increase overtime eligibility for workers earning up to $47,000 annually. Swerdlin says he predicted the Trump administration’s proposal would fall somewhere between Obama’s number and the 2004 rule.
He says he was a little surprised that President Trump plans to keep part of the 2016 rule provision that allows up to 10 percent of an employee’s salary to comprise nondiscretionary bonuses and incentive payments as part of the wages test.
Susan Harthill, partner at law firm Morgan Lewis, says that the current proposal would also change the “highly compensated executive” exemption threshold.
“The HCE exemption [is proposed to increase] from $100,00 to $147,414, which would make approximately 200,000 currently exempt HCEs eligible for overtime,” says Harthill.
Swerdlin adds that it will be interesting to see if any employer groups or unions file an opposition to the proposal.
“Back in 2016, some employers and lawmakers felt that the DoL had exceeded its authority by requesting to increase the overtime threshold to $47,000,” he says. “With the current proposal, it’s unlikely that someone could make the case of going beyond statutory authority.”
Right now, the proposal is open for a 60-day comment period, which could be extended if commenters submit requests for the DoL to do so, says Harthill. She adds that commenters can be expected to focus on a few controversial points of the proposal, including whether salary levels should be adjusted by region and whether it should include automatic updates.
“The 2016 rule included an automatic update mechanism, but the proposed rule says the Secretary of Labor intends to propose updates every four years through the arduous rule-making process,” Harthill says. “DoL specifically requests comments on this provision, indicating potential movement if commentators submit compelling arguments and data for or against it.”
For now, there isn’t too much employers have to worry about, given the pace at which change happens with government proceedings. Swerdlin says prudent employers should start to look at their employee populations to determine who will be impacted if the rule is finalized.
Some employers may increases wages to exempt employees from overtime, while others may want to implement or change their nondiscretionary bonus plans.
“This is a good time to do a compliance check or self-audit,” Swerdlin says. “Employers should look at all of their workforce to determine if they’ve made the right employment classifications–not just for salary but also for the job duties test, which will not change if this proposal is finalized.”