New Overtime Rule Expected Soon

March 6, 2019

According to reports, the U.S. Department of Labor (DOL) will soon propose a $35,000 salary threshold for overtime pay requirements. The rule implements the Fair Labor Standards Act (FLSA) and sets a threshold below which employees must receive time-and-a-half pay for hours worked beyond 40 in a workweek, regardless of their duties. The reported dollar figure is lower than that proposed by the Obama administration — $47,476 annually. The change was set to take effect in 2016 until a federal judge enjoined the rule.

If accurate, the new rule would significantly expand the number of workers eligible for overtime pay. It may be challenged in court, however, by worker advocates who say it does not go far enough and by business groups worried about new payroll costs. The DOL also plans to announce that it is considering ways to periodically increase the salary threshold for overtime eligibility, based on inflation and other factors. The DOL is opting to tackle that question separately so that any legal disputes do not stall the overtime regulation.

A formal Notice of Proposed Rulemaking (NPRM) is expected to appear in the Federal Register soon as DOL said it would propose rules in March 2019 and sent a proposal to the White House’s Office of Management and Budget (OMB) for review on January 16, as regulators want to get the rule finalized before the 2020 election.

The new rule would be the first update to federal overtime pay requirements in 15 years. Critics say that delay and a loosened “duties test” have narrowed the pool of employees who get time-and-a-half pay. The test is used to determine whether workers making more than the salary threshold are supervisors, not entitled to overtime wages.

The new salary threshold is on the higher end of what some have been expecting since DOL announced in 2017 that it was working on a new rule. Labor Secretary Alexander Acosta was directly involved in drafting the proposal and frequently changed his mind on the threshold figure, according to sources. That figure, which generally ranged from $33,000 to $38,000, wasn’t finalized until shortly before the DOL sent the proposal to OMB.

Regardless of the final rate chosen, judicial challenges are likely to beset new regulations, as was the case with the Obama-era regulations. The NPRM also will be subject to a public comment period, meaning any final changes are at least months away. Some experts have expressed concern that this delayed rulemaking, or even the delayed implementation of a new rule, could result in the $47,476 threshold appearing back on the table after 2020, an election year.