The Department of Labor’s proposed new overtime regulations are here. And wow, if they stay unchanged in the finalization process, will they ever increase overtime eligibility. DOL’s estimate is that more than 4.0 million people who today are classified as exempt from overtime under the FLSA who will become overtime-eligible. Far be it from my to second-guess an agency of the federal government, but I think that number is low. Way low.
The regulations were previewed last night by President Obama in an article on Huffington Post entitled “A Hard Day’s Work Deserves A Fair Day’s Pay.” Today, the DOL formally announced the proposed new regulations and, most helpfully, a FAQ page.
A quick read-through of the regulations suggests four major changes:
1. The salary threshold for the “professional, executive, and administrative” overtime exemptions will rise from $23,660 per year to $50,440 a year in 2016. That means that no more will the regulations classify a fast food manager making $2,000 a month as a “highly paid executive.” Mind you, the $50,440 threshold is still low — it’s only the 40th percentile of worker income — but it’s more than double the level set by the Bush Administration DOL in 2004.
2. The exemption salary threshold will increase annually rather than remain unchanged for long periods of time, but instead will grow over time.
3. The highly-compensated employee threshold will increase from $100,000 annually to $122,148, the 90th percentile of worker income. Highly-compensated employees are subject to a separate “duties” test for the exemption, and need have fewer supervisory responsibilities to be exempt.
4. The proposed regulations and commentary contain two “shots across the bow,” one general and one specific. The general can be found in DOL’s statement that while it is not now proposing changing the “duties test” (what job duties exempt employees must perform in addition to meeting the salary threshold), it is interested in comments on whether the duties test has been properly applied. The specific is that DOL “understands the importance of [concerns about off-duty use of smartphones, laptops, and other electronic devices] and will publish a Request for Information (RFI) in the near future seeking information from stakeholders on the use of electronic devices by overtime-protected employees outside of scheduled work hours. The Department anticipates issuing the RFI in August 2015.”
These are only proposed regulations and will not become final until the DOL completes the regulatory process. If past is prologue to the future, don’t anticipate too much a change between what we’re seeing now and what will become final.