Ready for the NEW OT Rule?


The U.S. Department of Labor (DOL) Solicitor of Labor M. Patricia Smith announced recently that the DOL’s Final Rule regarding the Fair Labor Standards Act (FLSA) White Collar Exemption Regulations will be published in July 2016, with an effective date of 60 days later.  While at this point it is unclear whether the Final Rule will reflect the Proposed Rule, employers should be ready to comply with the rule as proposed last year.

What is the big deal about this proposal?

While the proposed rule contains many provisions, its affect on overtime eligibility is the most controversial.  Under current law, an employer need only pay certain white collar employees $455 per week ($23,660 annually) to avoid paying overtime.  The new proposal calls for an increase in the current minimum salary threshold to $970 per week ($50,440 annually), with automatic threshold increases thereafter.  The DOL estimates that this change will affect nearly 5 million workers who currently are not eligible for overtime.

By way of example, in many industries (e.g, retail, fast food, gas stations) it is not uncommon for managers to earn annual salaries far below the proposed $50,440.  If the rule becomes final, employers will need to either increase manager salaries or be prepared to pay overtime to those workers.

Where does the DOL get the authority to issue this proposal?

The DOL cannot create new law.  The Fair Labor Standards Act (FLSA) is the law that guarantees minimum wage and overtime for certain workers.  However, the FLSA, passed by Congress and signed into law by President Franklin D. Roosevelt in 1938, specifically gives the DOL the authority to “define and delimit” the terms of the FLSA that exempt certain workers from overtime pay.  Since 1938, the DOL has updated the exempt salary level requirements 7 times, most recently in 2004.

So, the DOL can change the rules however it wants regarding overtime?

Not quite.  The DOL’s rulemaking authority is limited.  After a rule becomes final, individuals and corporate entities may go to the courts to make a claim that a rule is unconstitutional, was made without following the notice‐and‐comment process, was arbitrary, or an abuse of discretion.  In sum, the courts have the power to trump the DOL and invalidate a rule if the DOL goes beyond the authority delegated by the FLSA.

What should employers do now?

Now is a good time for employers to audit all positions to make sure employees are properly classified as exempt/non-exempt in accordance with current law.  The widespread press about the proposed rule might cause employees to question whether they are currently eligible for overtime.  For more information on how to make sure you are compliant with the FLSA, contact your favorite employment law attorney.

Sara J. Ackermann – Attorney @ Ruder Ware, L.L.S.C.

Special thanks to CWSHRM for providing this content.


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