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After a Long Delay, the DOL Issues a New Overtime Rule

After a Long Delay, the DOL Issues a New Overtime Rule Background Decorative Image

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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This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.