New Overtime Regulations Out for Public Comment

On March 22, 2019, the U.S. Department of Labor released a long-anticipated rulemaking that would make changes to the rules relating to worker eligibility for overtime pay. The Trump Administration rule would seek to fully rescind the 2016 Obama Final Rule on this issue, which is currently in litigation after a federal judge stayed its implementation, and change to the salary level test for exempting certain employees from overtime pay. TIA will file comments on behalf of its members prior to the May 21, 2019 deadline. To view the rule in its entirety, click here.

The new rule would increase the salary level test from the current level (last adjusted in 2004) of $23,660 to $35,308 annually. This increase would use the same methodology that was used to set the previous standard, rather than the newer methodology proposed by the Obama Administration in 2016. The rule would also adjust the exemption level for Highly Compensated Employees from $100,000 to $147,414. Additionally, the Trump Administration proposed rule would allow employers to use bonuses and nondiscretionary compensation to fulfill up to 10 percent of the salary level for the purposes of that test.

The 2016 rule from the Obama Administration potentially would have created significant hurdles for employers to exempt workers from overtime by increasing the salary-level test for exemption from $23,660 annually to $47,476 annually. While the Obama rule would have allowed employers to use bonuses and nondiscretionary compensation as up to 10 percent of an employee’s salary for purposes of the calculation, the dramatic increase in the salary level test would have presented a significant hurdle for many TIA members as well as employers throughout the country. In November 2016, a federal court judge found that the rule would have essentially created a single-prong salary level test for exemption, as opposed to the three-prong test laid out by Congress in its most recent update to the Fair Labor Standards Act (which includes being paid on a salary basis as well as a duties test as the other two prongs of the determination).

In 2017, the Trump Administration released a request for information regarding the overtime regulations, inquiring about how employers had prepared for implementation of the 2016 rule as well as to ascertain public feedback on establishing different standards according to state, region or metropolitan area. TIA filed comments in regards to the RFI encouraging the Department of Labor to:

1. Maintain a single, federal standard applicable across all state lines, because TIA members should not have the underlying costs of their work in interstate commerce distorted by favorable salary standards in specific regions;
2. Allow for bonuses and nondiscretionary compensation to account for a larger part of the salary level test, because the 3PL industry provides head-of-household incomes to thousands of employees through incentive-based compensation; and
3. Allow more time for businesses to understand and adjust to new regulations.

Questions about worker and employee classification are critical to how TIA members conduct their business and care for their employees and service providers. TIA will file comments on this critical issue on behalf of the entire 3PL industry. For more information on this important issue, please contact Will Sehestedt at sehestedt@tianet.org.