House Passes Overtime Delay

October 5, 2016

pic-clockOn Sept. 28, the House passed by a vote of 246 to 177, the Regulatory Relief for Small Businesses, Schools and Nonprofits Act (H.R. 6094) which would delay full compliance with the Department of Labor’s (DOL’s) new overtime rule from Dec.1, 2016 to June 1, 2017. Introduced by Rep. Tim Walberg (R-Mich.), Chairman of the Education and Workforce Subcommittee on Workforce Protections, the legislation will provide a much-needed six-month delay in the effective date of the DOL’s new overtime rule. A companion bill (S. 3462) was introduced by Sens. James Lankford (R.-Okla.) and Susan Collins (R-Maine). Despite its passage, the White House has already said the president will veto it.

On May 18, the 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.

With the deadline looming, there has been a recent flurry of legislative efforts to delay the December implementation date.

On Sept. 29, two additional overtime bills were introduced in the Senate. The first, the Overtime Reform and Review Act (S. 3464), from Sens. Lamar Alexander (R-Tenn.), Susan Collins (R-Maine), James Lankford (R-Okla.), Tim Scott (R-S.C.), and Jeff Flake (R-Ariz.) introduced legislation similar to a bill introduced by Rep. Kurt Schrader (D-Ore.) that would phase in the new salary threshold over five years, and would require the Government Accountability Office (GAO) to conduct a report during the rule’s first year to assess its economic effects. Should these be unfavorable, then nonprofits, colleges and universities, state and local governments, and health care organizations that received more than half their funding from Medicare and Medicaid would be exempted from the rule. The second bill, from Chairman of the Senate Committee on Small Business and Entrepreneurship David Vitter (R-La.) would delay the rule’s implementation by two years—until December 2018.

All these bills were introduced in the week after nearly 50 business groups and 21 state attorneys general filed lawsuits in federal court to block the overtime rule. The 30-page lawsuit states the Obama administration is trying to impose heavy costs and its own policy choices on the states in violation of the Tenth Amendment.

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.