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Federal Overtime Rule Updates

March 7, 2019

Overview

On March 7, 2019, the U.S. Department of Labor (“DOL”) issued a proposed revised rule regarding the salary required for an employee to be considered exempt from the federal overtime rules, raising the rate to $679 per week ($35,308 per year). As you may recall, on July 26, 2017, the DOL announced that it would adjust the salary level to $913 per week ($47,476 annually), up from the $455 per week ($23,660 annually) previously required. This large increase caught many employers off guard, especially smaller business owners and those in the nonprofit and educational sector. On the eve of the rule’s effective date, a Texas District Court permanently enjoined it, which the DOL later appealed, but moved to stay the case while the DOL went back to the drawing board on the rule.

It is no surprise that we are looking at a new overtime proposal. When Alexander Acosta, Trump’s appointment as Labor Secretary, took office, he stated that he favored an increase in the salary level to somewhere in the low $30,000 range. The DOL issued a new request for information and started the hard work to put together a proposal that would fairly compensate employees, but would also be acceptable and fair to employers. In this new proposed rule, the DOL is asking for public feedback over the new increase and whether to allow employers to count nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary level test, provided that the bonuses are paid annually or more frequently. As in the prior rule, the DOL is not proposing any changes to the standard duties test. In addition, as in the prior version of the rule, the DOL proposes to increase the Highly Compensated Employee amount from $100,000 to $147,414 per year. The new proposal does not include any automatic increases of the salary threshold, as the prior rule did, but it does ask for public comment on whether and how the DOL might make updates to the rule every four years.

Even with the announcement this month, the rule will not be effective until sometime in late 2020. The rule must go through an extensive public comment period before its enactment. If the rule is not passed, then we could see the DOL lifting the stay on its appeal of the Fifth Circuit Court injunction related to the prior more onerous rule.

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