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Dive Brief:
- The U.S. Department of Labor’s final rule updating the standard under which certain workers may be excluded from the overtime pay requirements of the Fair Labor Standards Act White House approved review Thursday.
- The details have not been made public but DOL last year proposed to increase the minimum annual salary that determines eligibility for overtime from $35,568 to $55,068; If adopted as proposed, the rule also will provide for automatic future updates up to the limit every three years. The exemption applies to employees employed as bona fide executives, managers, professionals and outside sales employees, as well as certain computer employees.
- The final rule must now be published in the Federal Register before it can take effect. In December, DOL predicted it the rule would be published in April.
Dive Insight:
One of the most anticipated regulatory updates to labor law appears to be right on schedule. Employers could see the final rule appear as early as the end of next week, if not sooner, said Brett Coburn, a partner at Alston & Bird.
In public comments on the DOL’s initial proposal, the Society for Human Resource Management asked the DOL to consider delaying the effective date of the final rule to 2025which SHRM said will allow employers to “link any classification or pay-related changes to budgeting efforts and operational changes for the new year.”
Until the final rule is published, however, it is uncertain what changes the department will make to its original proposal. This includes the effective date of the rule as well as the salary cap itself. While the proposed rule set the annual minimum at $55,068, the agency said in the proposal that this could change.
“The Department relied on [U.S. Bureau of Labor Statistics] calendar year 2022 data to develop this NPRM, including determining the proposed wage level,” DOL wrote. “In the final rule, the Department will use the most recent data available, which will change the dollar figures.”
Once published, the final rule is almost certainly headed for litigation. “But just because lawsuits are moving quickly doesn’t mean much in terms of when a court will rule,” said Coburn, who compared the current situation to that. faced by the Obama administration in 2016, which similarly issued an updated overtime rule months before the presidential election. “It’s like a repeat of what we saw in 2016.”
In publishing the proposed rule, the DOL estimated that approximately 3.6 million workers would receive overtime as a result. In addition to the aforementioned provisions, the rule would also increase the total annual compensation requirement for certain highly compensated workers to $143,988 per year. The DOL proposed no changes to the “duty test” for determining overtime eligibility.
Coburn said employers will must be prepared for the final rule in part by determining the number of workers whose compensation falls between the current and newly proposed limits. Employers can decide to raise the wages of these workers to maintain their exempt status or convert them to non-exempt status. However, there are many considerations that need to be made regardless of how an employer proceeds, including cultural aspects.
“I have so many customers who say [that they] they have so many people they want to get rid of and pay a salary,” Coburn said. But “there is no good answer” to the question of how employers should manage such workers, he continued. “The law is what it is. If they are not exempt, they must track their time. They can’t check email at night and do things that exclude employees.”