FLSA Overtime Rule Update

The 2016 proposed salary threshold increase for exempt employees remains stalled. A November injunction blocked a new Fair Labor Standards Act (FLSA) rule set to take effect December 1, 2016. This rule would have doubled the salary threshold under which overtime must be paid. Following several appeals by the Department of Labor and corresponding extensions, the bill seems no closer to passing. 

The Department of Labor’s authority to set salary levels is being contested. (Federal Judge Amos Mazzant of Texas also suggested that rather than adjusting the threshold, the DOL should look more closely at the duties tests required to qualify an employee as exempt.) Until the authority issue is settled, the DOL’s proposed overtime rule change for executive, administrative, professional computer and outside sales employees remains unchanged.

Wage-hour legislation historically slow

But if you read a bit of wage-hour legislation history, you’ll see this debate is nothing new. According to DOL history, as far back as 1918, wage-hour legislation, child labor and sweatshop wages have been hotly contested. It took almost 20 years for the Fair Labor Standards Act of 1938 to become law … following many compromises before finally establishing a whopping 25-cent minimum wage (low even for those times)!

For the past 60 years, certain executive, administrative, professional and other highly compensated employees performing non-manual labor, have been exempt from the minimum wage and overtime pay protections. A series of job responsibility “tests,” including a salary level test, are used to determine exempt status. The current FLSA Overtime Rule earmarked for change, sought to raise the salary threshold (set in 2004) from $23,660 ($455 per week) to $47,476 ($913 per week) with outlined exemptions for specific white collar employees—giving overtime pay to anyone below that level. The DOL’s final rule also included an every-three-year salary threshold adjustment.

Opponents of the rule “argued that it would impose unwieldy costs and time-tracking obligations on employers and make it harder for workers to climb the corporate ladder by eliminating lower-level manager positions,” reported bna.com. Advocates for the hard-earned overtime pay change praised the rule as a boon to 4.2 million middle-class workers, arguing that it’s hard to call even a $40,000 a year employee exempt.

While we wait

Before the new rule was blocked (10 days before it was to take effect) some companies had already moved to comply with the new salary threshold, raising managers’ salaries at or above the proposed new $47,476 mark. Most of these organizations kept those changes in place. Others who had announced, but not yet implemented changes, chose to either go ahead or postpone—a mixed bag.

What happens next is uncertain as the DOL seeks to clarify its authority.

The rule could take effect as it stands, be halted entirely or be modified with a more modest “phased-in” approach, suggests lawjournalnewsletters.com. Regardless, experts agree it’s a good idea to ensure that job descriptions and responsibilities line up with exempt duties tests. Regular audits of the jobs near these salary thresholds and responsibility lines will help ensure a smooth transition regardless of the future of the FLSA overtime rule changes.