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U.S. Department of Labor’s New Proposed Rule on Overtime

The U.S. Department of Labor announced in March its new proposed rule to expand overtime eligibility to 1.1 million American workers. The proposal would update the regulations governing which “white collar” workers are entitled to minimum wage and overtime pay. Under the Fair Labor Standards Act (FLSA), employers do not have to pay overtime to those workers who 1) meet the duties described in the FLSA for certain executive, administrative, and professional workers, and 2) earn above $23,660 annually.  Workers who do not meet the duties test or who earn below $23,660 must be paid overtime if they work more than 40 hours per week. The DOL proposal would increase the salary level from $23,660 to $35,308, thereby allowing employees who work more than 40 hours in a week and receive below the new threshold to earn overtime pay.

While the $23,660 figure has been the salary level since 2004, the Obama Administration proposed in 2016 to nearly double the threshold to $47,476, benefiting 4.2 million workers, and to have the threshold subject to automatic adjustment every three years.  Just weeks before this new regulation was set to take effect, however, a federal judge in Texas issued a nationwide injunction. The new regulations were therefore never implemented, and the issue has been on hold until earlier this month when the Labor Department announced the new proposed rule.

In addition to increasing the standard salary level to $679 week (equal to $35,308 annually), the Department’s proposed rule also increases the total annual compensation requirement for highly compensated employees from $100,000 (another figure set in 2004) to $147,414 per year. Any individual earning $147,414 or more would be ineligible for overtime if they meet the reduced highly compensated employee duties requirements.

The proposed rule does not include any mechanism for automatic adjustment of the salary level but does state that DOL intends to update the salary level every four years.

These proposed changes rescinding the Obama Administration rule and updating the regulations issued under the Fair Labor Standards Act will now face a 60-day public review period, where individuals can comment on the proposal before a final version is sent to the White House for review.  Harmon, Curran will update this article as new developments arise.

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