House to Vote on Overtime Rule

September 28, 2016

AA017956On Sept. 29, the House will vote on a bill introduced by Rep. Tim Walberg (R-Mich.) that would delay by six months the Department of Labor’s (DOL’s) overtime rule, which is set to take effect in December 2016. However, even if Congress approves the measure, the bill still faces a near-certain veto from President Barack Obama.

On May 18, the U.S. Department of Labor (DOL) issued the final version of a much-anticipated overtime exemption rule, raising the minimum salary threshold required to qualify for the Fair Labor Standards Act’s (FLSA’s) “white collar” exemption to $47,476 per year, which will automatically extend overtime pay to more than four million workers within the first year of implementation.

Under the existing rule, which has been in effect since 2004, employees must be paid a minimum salary of $455 per week to qualify for the “EAP” – executive, administrative, professional – exemptions from the FLSA’s overtime requirements. Under the new final rule, the exempt employee threshold of $47,476 is less than the proposed rule’s $50,440, but slightly more than double the old threshold of $23,660.

The impact of the increase will escalate in coming years; the rule includes a hike every three years in the minimum salary for exempt employees. The automatic increase will be based on the 40th percentile of the weekly earnings of full-time salaried workers in the lowest-wage Census region, the South. Employers must comply with the new rule by Dec. 1, 2016—a much longer time to comply than the minimum 60 days required of final rules.

Rep. Walberg’s bill is not Congress’ first attempt to delay the overtime rule. Rep. Kurt Schrader (D-Ore.) introduced the Overtime Reform and Enhancement Act (H.R. 5813) to gradually phase-in the DOL’s final overtime rule. This legislation would phase-in the DOL’s new salary threshold over three years, starting with a substantial salary threshold increase to approximately $35,984 on Dec. 1, 2016. Additional increases would occur in Dec.2017, 2018 and 2019. Importantly, if enacted, the legislation would also prohibit the final rule’s automatic increases to the salary threshold.

Another piece of legislation that NSBA continues to strongly support is the Protecting Workplace Advancement and Opportunity Act (H.R. 4773/S. 2707), which would require DOL to perform an economic analysis of how changes to overtime regulations will impact nonprofits, small businesses and employers in other industry sectors before issuing a new rule.

Meanwhile, Senators Lamar Alexander (R-Tenn.) and Ron Johnson (R-Wis.) introduced a Congressional Review Act (CRA) resolution, S.J.Res.34, to nullify the overtime rule. The resolution has strong support, with 44 senators listed as cosponsors. If the resolution passes, it would void the overtime rule; however, it would require the president’s signature in order to become law. Therefore, this is an unlikely outcome since President Obama is on record publicly supporting the overtime rule.

NSBA is a member of the Partnership to Protect Workplace Opportunity, a coalition that is working to change the new overtime rule. When first proposed, NSBA submitted comments and among the key issues raised by NSBA’s comments included: the cost of compliance for small businesses will be much greater than the DOL estimate; changes to the duties test are likely to miss the fact that there is no bright line between “exempt” and “non-exempt” in the typical small business workplace; the creation of new hourly reporting and tracking requirements are likely to be a disproportionate burden on smaller firms; the rule could force struggling small firms to reduce employee hours; and employee morale will take a significant hit where employees must be  “downgraded” from exempt managers to non-exempt workers. Please click here to download NSBA’s comment letter.

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