U.S. Department of Labor's Proposed Overtime Rules Are Finally Here

On June 30, 2015, the U.S. Department of Labor ("DOL") finally issued the proposed rule which will expand overtime pay and reduce the group of employees who qualify for exemptions under the Fair Labor Standards Act ("FLSA"). You will recall that in order to qualify for a white-collar exemption under the FLSA, an employee must be paid a fixed salary that meets the minimum threshold and the employee's primary duty must be the performance of exempt work.

The proposed rule more than doubles the salary threshold for the white-collar exemptions (executive, administrative, professional, outside sales, and computer) from $455.00 to $921.00 a week ($23,660 to $47,892 annually) with a plan to increase the $921.00 to $970.00 a week ($50,440 annually) in the final version. The thresholds would be automatically updated annually under the new rule. There is also a proposed increase in the annual exemption for highly-compensated employees, from $100,000 to $125,148, with a yearly increase thereafter that is tied to a percentile. As such, each year employers would need to modify their payrolls to ensure that employees are properly classified as exempt.

The proposed rule also addresses bonuses and incentive payments, commission payments, and exclusions for benefits.

While no specific changes are proposed, the DOL also stated that it is considering whether changes to the "duties" tests for the exemptions are needed. It is asking for comments on that issue as well.

The DOL's rule is only a proposal at this time. The proposed rule was published in the Federal Register on Monday, July 6, 2015. The public, including all employers, may comment on the proposal for a period of 60 days. Comments must be filed by September 4, 2015. The DOL will then issue a final rule which is likely to include variations from the proposed rule. Keep in mind, the public may not have the opportunity to comment on these variations.

WHAT SHOULD EMPLOYERS DO NOW?

For now, employers should consider working with Chambers of Commerce, Human Resources and business organizations to review the rule and submit comments to make their concerns heard.