Ahead of the Curve: Potential Changes to Overtime Rules Lurk for Business Owners
The latest regulatory calendar from the U.S. Department of Labor indicates that the Department currently plans to propose new regulations relating to overtime pay in March 2019. These regulations, which were last changed in 2004 and which had a rulemaking under the Obama Administration halted by the Federal Courts, determine the basis, salary levels, and duties requirements that must be met to exempt employees from overtime pay.
Federal law regarding eligibility for overtime pay is laid out in the Fair Labor Standards Act (FLSA), and the Department of Labor has issued and updated regulations under FLSA to provide employers with the tools to determine whether employees are exempt or non-exempt from mandatory eligibility for overtime pay. To be exempt from overtime pay, employees must be paid on a salary basis, above a minimum specified salary amount, and their duties must primarily be executive, administrative or professional as defined in detail by the Department’s rules. The current salary level below which an employee is eligible for overtime pay is $455 per week, or $23,660 on an annual basis. The Obama Administration’s rule proposed increasing that salary level for exemption to $913 per week, or $47,476 on an annualized basis (meaning that employees earning less than that salary level would be eligible for overtime compensation), but a federal judge halted implementation of that rule largely on the grounds that such a high salary level would in effect create a single-prong test rather than a three-prong test.
Business interest groups expect that a new rulemaking from the Trump Administration could potentially raise the salary level somewhere in between the current level (set in 2004) and the Obama Administration’s proposal, along with updating the duties test exemptions to reflect a more modern workplace. In 2017, TIA filed comments on a Department of Labor Request for Information (RFI) that encouraged the Department to maintain a single national standard (rather than multiple state- or regional-based standards) and to allow business owners significant time to adjust to any changes in the regulations.
When the Obama Administration published the 2016 final rule, it allowed a 6-month period before the regulations took effect. Should the Trump Administration publish its final rule in March 2019, as is currently anticipated, then the rule would most likely take full effect prior to the end of 2019. For more information on this critical issue, please contact TIA Government Affairs at email@example.com or 703-299-5700.
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