A quick overview
Last March (2015), President Obama directed the Department of Labor (DOL) to modernize and streamline the overtime rules. As a result, a proposed rule was published in the Federal Register last June that opened a 60-day comment period and more than 260,000 written comments in favor of and criticizing the overtime proposals were submitted by the deadline.
This March (2016), the DOL submitted the final rule to the Office of Management and Budget (OMB), which is the last step before the rule can be released. The OMB typically takes between 30 and 60 days to review a regulation. Once the OMB’s completes its review, the DOL will release the final rule, publishing it in the Federal Register. Our best guess is that the final rule will be published this May (2016) and it will likely be effective 60-days following the date it was published in the Federal Register.
Summary of the proposed changes
The proposed rule focuses on increasing the salary thresholds for exemption. It will more than double the minimum salary threshold for “white collar” exemptions (executive, administrative, professional), increasing the threshold from $455 per week to $970 per week ($23,660 to $50,440 on an annualized basis). Also, it will increase the minimum compensation threshold for highly compensated employees from $100,000 per year to $122,148 per year and adjust the salary threshold for the computer employee exemption to be the same as that for the white collar exemptions. The hourly rate threshold for the computer employee exemption of $27.63 per hour, however, will remain unchanged. Lastly, it will automatically update the salary thresholds annually based on average salary nation-wide, or the CPI-U.
Call for comments on the duties tests
The DOL also invited comment on possible changes to the duties tests for “white collar” exemptions that include:
- Establishing a bright line rule that exempt duties must be 50% or more of an employee’s duties, or
- Changes the executive exemption to eliminate nonexempt duties, among others.
It is unclear if the DOL plans to implement changes to the duties tests. An attorney from BLR’s Employers Counsel Network (ECN), however, believes the DOL will include changes to the duties tests in the final rule, but to date there is no indication, other than the above, as to what exactly the changes may be.
You can find more information about the proposed changes to overtime pay regulations here:
- DOL’s proposed overtime regulations video: What you need to know
- Quiz: Test your knowledge on the proposed changes to the overtime regulations
- 10 ways employers should prepare for final overtime regs
- DOL’s new overtime regs advance
- Final overtime rules due in July 2016