It has been a while, but there is finally movement on the Department of Labor’s proposal to drastically change the white-collar exemption regulations of the Fair Labor Standards Act, which will result in millions of employees across the country being entitled to overtime pay that are not currently so eligible.
Monday afternoon, the Department of Labor sent its proposed “final rule” (this is the final version of the revised regulations) to the White House Office of Management and Budget. This was not expected to happen for a few more months and is a necessary step to the regulations being published and, ultimately, becoming final. Normally, review by the Office of Management and Budget takes 30-60 days. Following that review, the final regulations will be published, which will also include a date for the regulations to take effect, normally another 60-90 days after publication.
As you will recall, last summer the Department of Labor proposed new regulations for the Fair Labor Standards Act that, among other things, included moving the minimum salary level for exemptions over $50,000 per year. The Department of Labor received over 270,000 comments on those proposed regulations. The sending of the new proposed final regulations to the Office of Management and Budget now signals that their review of those comments is completed and the new regulations are one step closer to reality.
Once the final regulations are published, Congress still has an opportunity to attempt to neutralize them through procedures set forth in the Congressional Review Act. Such action would need to be taken within 60 days of the publication of the final rule. By having the Department of Labor moving the regulations forward now, President Obama is ensuring that he will still be the one in office during that period and he will have the ability to veto any Congressional attempts to neutralize the new regulations and, unless something changes dramatically, Congress would not have the votes to over-ride that veto.
Some of the things to look for when the final regulations are announced will include:
1. The effective date. Obviously, employers are looking for a longer period to make the necessary changes to their employees’ pay/classification.
2. The salary level. The regulations proposed last year set the minimum level at the 40th percentile of weekly earnings for full-time salaried workers, rather than a fixed dollar amount. It is believed that a large number of the comments the Department of Labor received focused on where this amount would end up. It was projected to be $50,440 in 2016, but where it actually ends up will be something to look for.
3. Whether the salary level is fixed or moving. The regulations proposed last year stated that the salary level for exemptions would be re-set periodically, although the frequency of this was unknown at the time, whether it would be annually, every-other year, etc. This is something that the final rules will need to specify.
In light of these changes, we are encouraging all employers to be proactive and sign up for our FLSA Compliance Program, which we are offering for a flat $500 fee. For that fee, you will receive regular updates, updated policies, and form notification letters to your employees that may have to be changed from exempt to non-exempt, as well as tools for calculating an appropriate hourly wage for someone who needs to be converted from a salaried, exempt position to an hourly, non-exempt position.
For any questions about this post or any other labor and employment matter, please do not hesitate to contact a member of our Labor and Employment Department.