Department of Labor Issues New Proposed Overtime Rule

On March 7, 2019, the Department of Labor issued a Notice of Proposed Rulemaking that makes changes to the federal overtime regulations. The public will have 60 days from publication in the Federal Register to comment on these new proposed rules. After that comment period, the Department of Labor will issue its final rules, and compliance deadlines.

Since 1940, the Department’s regulations have generally required each of two tests to be met for one of the FLSA’s exemptions to apply: (1) the employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (“salary test”); and (2) the employee’s job duties must primarily involve executive, administrative, or professional duties as defined by the regulations (“duties test”). The new proposed rule makes changes to the salary test. The duties test remains the same under the proposed rules.

Major Changes in the Proposed Rule: 

• Increase the standard salary level to $679 per week ($35,308 annually), up from the currently enforced level of $455 per week ($23,660 annually).
• Increase the total annual compensation requirement needed to exempt highly compensated employees to $147,414 annually, up from the currently enforced level of $100,000 annually.
• Allow employers to use non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary level, provided these payments are made on an annual or more frequent basis. The Department is inviting comment on whether the proposed 10 percent cap is appropriate, or if a higher or lower cap is preferable.

The Department of Labor estimates that 1.1 million currently exempt employees who earn at least $455 per week but less than the proposed standard salary level of $679 per week would become eligible for overtime under these new proposed rules (without some intervening action by their employers, such as raising their salary).

Recall in 2016, the Department of Labor issued proposed overtime regulations that made broad changes – including increasing the salary threshold. On the eve of the effective date, a court issued an injunction stopping the new regulations from becoming effective. We know many of you evaluated the exempt status of your employees and made changes to assure compliance because of those proposed changes. These new proposed regulations have some similarities and differences to the 2016 proposal rules that never went into effect. Simmons Perrine Moyer Bergman PLC is currently reviewing the new proposed regulations and plans to host a seminar and/or webinar to review the changes and how to achieve compliance.

Questions relating to this article can be directed to our employment law attorneys.

*Disclaimer: This article is intended for informational purposes only and is not intended to be legal advice. Please contact an attorney with specific questions.