DOL Issues Proposal for Expansion of Overtime Eligibility

On June 30, the U. S. Department of Labor announced a Notice of Proposed Rulemaking that will greatly expand the number of employees entitled to overtime pay by approximately 5 million workers. 

The DOL proposes to amend its “white collar” exemption regulations issued under the Fair Labor Standards Act. The “white collar” regulations implement the exemption from minimum wage and overtime pay for executive, administrative, professional, outside sales, highly compensated, and computer professional employees. Final regulations are expected to be in place by late this year and/or early 2016.

The primary proposal is to raise the salary level for exempt white collar employees from $455 per week to $921 per week or an annual salary of approximately $47,892. DOL has stated that this proposal is an effort to update overtime rules that have been diminished over the years by inflation. The current proposal more than doubles the current threshold of $455 per week, set in 2004.
 
While this proposal will apply across many industries, it is expected to have a profound effect on the retail, grocery, and hospitality industries because some of their managers would be eligible for overtime pay for the first time. The Wall Street Journal has reported that companies and business groups have already publicly criticized this proposal, warning that the new requirements will result in reduced work hours and will truncate job growth.
 
The Notice of Proposed Rulemaking also states:
Regulations may be enacted for a mechanism of automatically increasing the salary level test each year.

Subject to the receipt of comments, the DOL will consider imposing a 50% limit on the amount of non-exempt work an exempt employee may perform in a work week. Quite candidly, the Notice states that the DOL believes the increase in salary level is sufficient to identify employees who are “truly exempt,” but wants to consider any suggested modification of the duties test that would ensure a contrary result to cases which have held “working managers” who spend 80% to 90% of their time performing non-exempt work are covered by the exemption.

The DOL is considering whether to allow employers to include nondiscretionary bonus and incentive payments as part of the salary level test.

The DOL is proposing to raise the salary level for the highly compensated employee exemption from $100,000 to approximately $122,000.

The DOL is willing to entertain comments to include additional examples of the application of the duties test for executive, administrative, professional, and computer professional exemptions to specific occupations. However, the DOL cautioned that it “continues to believe” that the category of employees encompassed within the computer professionals exemption should not be expanded.

The Department of Labor is opening a 60-day comment period on the proposed rulemaking. The deadline for submitting comments to the DOL is 60 days after publication of the Notice in the Federal Register, which has not yet occurred as of this writing.

Nyemaster Goode is assisting clients in preparing comments in response to the Notice of Proposed Rulemaking.  Our Labor & Employment practice group will continue to monitor this significant development.