After a Long Delay, the DOL Issues a New Overtime Rule
In November 2016, a Texas federal
judge enjoined the Obama administration’s regulations that sought to raise the
salary-level requirement for white collar exemptions under the Fair Labor
Standards Act from $23,660 to $47,476. Rather than appeal the injunction, the
new Trump administration instead chose to withdraw the regulations so that they
could be reconsidered.
On Tuesday, the Trump
administration announced a new final rule raising the salary requirement to a
much more modest $35,568. The new rule also raises the “highly compensated
employee” threshold to $107,432, which is considerably less than the $134,004
that was originally proposed in the 2016 regulations.
The DOL estimates that this final
rule — which will go into effect on January 1, 2020 — will affect up to 1.3 million
workers. Many of the workers impacted will be front line supervisors in retail
and food establishments.
My general guidance to employers remains the
same as the guidance I gave three years ago: first, now that we know what the
new salary threshold is, assess how these changes will affect your business — who
is being paid how much, do they meet the new threshold, and if not, how many
hours, if any, over forty do they typically work? This will help you understand
how much your payroll costs would go up under the new threshold, all else equal.
Second, begin thinking about what you might do to keep these overtime costs
down, and there are a number of ways that you might do that. For example, if an
exempt employee makes just under the new threshold, it may be best to increase
that employee’s salary. You may want to reconsider the allocation of job
responsibilities between different personnel or adjust schedules in order to
reduce overtime. You may decide that it is smarter to add more employees, or
you may reduce fringe benefits in order to justify paying certain employees a
higher salary (unfortunately, the DOL does not give you credit for providing
those benefits). Finally, make sure your managers and board members understand
the impact that the new regulations may have so that no one is surprised when
they go into effect.
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