Human Resources News & Insights

DOL quietly drops big news on new overtime rules

The DOL’s been pretty quiet about what it’s doing behind the scenes about changing the overtime exemption rules and salary threshold. But it has finally spoken. 

This week, at the American Bar Association’s Labor and Employment Law conference in Philadelphia, the Solicitor of Labor M. Patricia Smith shared some insider info that elicited “gasps” from the audience, according to a report by The Wall Street Journal.

Smith said during a panel discussion that the finalized changes to the FLSA’s overtime eligibility rules likely won’t be issued until late 2016. From that juicy piece of info, one could surmise that they won’t take effect until 2017.

This is huge news for the business community, which hasn’t been shy about expressing outrage over the proposed overtime rule changes the DOL issued this summer. The delay means employers have more time to prepare, even though they don’t know what the finalized rules will look like yet.

The period during which the public can comment on the proposed rules ended Sept. 4, and the DOL received roughly 270,000 comments during that period. That’s about three times the amount of comments the agency received when it last updated the overtime rules back in 2004. About 50,000 comments came in during the last week alone.

But despite that last-minute outpouring of commentary, the DOL announced it wouldn’t extend the comment period. It said the standard 60-day comment period — combined with its outreach efforts prior to the proposal being published — was enough to “produce a quality regulation.”

So all signs pointed to the final rules being issued sometime in early 2016. But Smith cited the amount of comments it received and the complexity of the law as the two main reasons the agency’s looking at a later date for releasing the rules.

What we do know

While the DOL’s been mum on whether or not it’ll make significant changes to its proposed rules, we do know a few things for certain about what’ll be in the final rules.

For starters:

  • The minimum salary threshold will rise … significantly. The current threshold a worker must hit to be overtime-exempt is $23,660. The proposed rules seek an increase to $50,440. And while it may not climb quite that high, it will climb — likely to at least $40,000 or so.
  • The threshold will automatically increase. For the first time ever, the salary threshold will be tied to an automatic-escalator, so it can keep pace with inflation — and so major legislative changes aren’t needed every time lawmakers want it to increase.
  • The DOL is looking at making changes to the duties tests. The DOL hasn’t suggested changing the executive, administrative, professional, computer or outside sales duties tests (see them here) yet. But the agency did specifically ask for comments on whether the tests should be changed and whether they’re working to screen out employees who are not bona fide white collar exempt employees.

The X factor

There is one X factor in all of this that no one has mentioned yet: the effect the upcoming presidential election will have on the rulemaking process.

Originally, the DOL had set a tentative deadline of November 2014 for issuing the proposed rules. Then, they didn’t come out until more than six months after that soft deadline had passed.

Then, it was expected the finalized rules would be issued sometime in early 2016. Now, that’s clearly not what’s going to happen. All of these delays have butted the rulemaking process right up against the presidential election.

This begs the question: Would the Obama administration really issue a highly controversial set of finalized rules just prior to the election?

After all, business groups, employers and even a former DOL administrator (who oversaw the last rule changes) have staunchly opposed the proposed rule changes, saying they’ll stifle companies’ ability to operate, drive prices up and/or actually hurt the very people the rules are trying to help. This could potentially give the GOP more ammunition to use on the campaign battlefield.

On the other hand, if public opinion polls reveal that the rule changes are something the voting public wants and views as beneficial, the Democrats may try to push the final rules through prior to the election to give their political campaigns a shot in the arm.

Time will tell which scenario will play out — but a lot of it likely depends on how Democrats feel the voting public will react to the rule changes once they’re finalized.

One final thing to consider: Since the entire rulemaking effort was spurred by the Obama administration, and heavily backed by Democrats, it’s entirely possible any finalized rule changes will be repealed should a Republican win the White House next fall.

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