Forthcoming Overtime Rules Subject of House Hearing

June 10, 2015

AA017956With proposed new overtime rules expected to be unveiled from the Department of Labor at any time, the House Committee on Education and the Workforce held a hearing this morning to explore the impact of such a rule on the business community and the larger economy.

When issued, it is expected that the new overtime standard will make changes to the standards for exemption from the payment of overtime, most significantly the Administrative and Professional (EAP) exemption. To qualify for this exemption, workers must: 1) be paid on a salary basis, with no reduction in pay when fewer hours are worked in a day; 2) the salary must be at least $455 per week; 3) demonstrate through a series of tests that the work is executive, administrative, or professional in nature—the so-called duties test.

When the Department of Labor (DOL) issues its new rule, it is expected to markedly increase the required weekly salary level, an increase that could be 100% or more. DOL could also make changes to further constrain the duties test, an action that could have disproportionate effect on smaller firms. In smaller workplaces, it is much more common and necessary for all employees, including managers, to sometimes be engaged in non-managerial activities. If such activities make these managers ineligible for the overtime exemption, the proposed rule could have enormous consequences for smaller businesses.