USDOL Headquarters in DC
Late Monday, several reports on Twitter indicated that the Department of Labor would be announcing and releasing the final version of the revisions to the white-collar overtime regulations. You can see my prior posts on the subject here and here.
This has been a long time coming. It was way back in 2014 (!) that the President indicated that he wanted the USDOL to revisit them.
And the anticipation on Twitter has been breathless with so-called experts predicting for months that the new regulations would be released any day. Or last week. Or in July. And speculation on what would be in the final overtime rule has run rampant.
So, rather than predict what will be in the final regulations, I want to highlight three areas that I’ll be looking at in my initial review of the regulation.
- Salary Test: The proposed rule last year raised the salary test to $50,440 from its current level of $23,660 (which the vast majority of employees meet in Connecticut due to minimum wage being high.) The latest thinking is that the final rule will set that threshold at $47,000. (UPDATED: News reports on Tuesday afternoon indicated that the threshold will be set at $47,476 and be updated every three years.) What does that mean? It means that any employee who is paid less than that amount regardless of his or her duties would need to be paid overtime for any work over 40 hours. That would indeed be a big change. So, when we look at the new rule, first item to look at is the salary threshold set by the USDOL. There is no question it will be high; it’s just a question of how high. Bonus item to look at: Will the salary test be tied to inflation? In other words – will the threshold keep up with inflation automatically in future years? The proposed version tied it to the 40 percentile of income; will that remain in the final rule?
- Duties Test: The proposed rule did not explicitly change the duties test for overtime — meaning that the administrative, professional and executive exemptions would still apply as current framed — albeit at a higher salary threshold. However, the proposed rule solicited input from the public about how best to alter the duties part of the test. Would the USDOL be so bold as to introduce changes to the duties test without first floating it in a proposed rule? The prevailing wisdom is no, but keep an eye on that and any hints about future revisions to this rule. (UPDATED: News reports on Tuesday suggest that no changes to the duties tests will be forthcoming.)
- Timing: Another thing to look for in the final rule: How much time will employers have to comply? And how long until the rules go into effect? Back in November 2015, a government official suggested that employers would have 60 days to comply. Will that hold up? (UPDATED: News reports on Tuesday also indicated that employers will have until December 1, 2016.)
For employers in Connecticut, the new rules will make things particularly challenging. For years, Connecticut’s stricter overtime rules have been the go-to source for employers. However, with the new federal rules being even stricter (or, more favorable to the employee) than the state rule, we may see a return to federal dominance. So a bonus thing to look for in Connecticut: How will these rules interact with Connecticut’s rule? Don’t just read the federal rule in isolation.
And to be clear, there are other aspects of this rule that we will undoubtedly have to look for. But I’m not going to make predictions about a rule we haven’t seen.
I will make one overall prediction, however: Publications, blogs and people on Twitter are going to be hysterical over the pronouncements of the new rule. My suggestion? Ignore them. The hype is designed, in part, on scaring employers into a frenzy.
What to do instead? Employers should view this new overtime rules with a bit of detachment. Get the facts. Then, figure out what applies to your business and start work on a plan to meet those requirements.