SHRM
Employment Law and Legislative Conference
FLSA Overtime Exemption Regulations:
Changes Delayed, But Expected This Spring
By Tammy McCutchen
In
Tammy McCutchen is a Principle in the Washington D.C. office of Littler Mendelson, and served as Administrator of DOL’s Wage & Hour Division from 2001 to 2004.
In March 2014, President Obama, declaring that “Americans have spent too long working more and getting less in return,” ordered the U.S. Department of Labor to revise the “white collar” overtime exemption regulations, with a goal of making millions more workers eligible for extra pay when they work more than 40 hours a week. New York Times, March 13, 2014. This announcement came as a bit of a surprise to DOL watchers – previously in the Obama Administration, the focus of DOL’s Wage and Hour Division had been the misclassification of employees as independent contractors. DOL’s budget requests sought additional funds for an independent contractor misclassification enforcement initiative, and the primary regulatory focus for the Wage and Hour Division was proposing the “Right to Know” regulations which would require employers to provide notice to workers of their status as an employee or independent contractor. Revisions to the FLSA regulations had not been listed on DOL’s regulatory agenda, which is published twice yearly to put the regulated community on notice of the regulations that DOL is working on. President Obama’s announcement came on the eve of the 10th anniversary of the revisions to the overtime regulations published on April 23, 2004. The speculation, the predictions began immediately: When will the changes go into effect? What changes will DOL make? How will the changes impact my company?
When will the changes go into effect? Initially, DOL’s semi-annual regulatory agenda stated that the proposed regulations would be published in November 2014. But, in October 2014, the Solicitor of Labor stated that the proposal “remained months away and that she hoped to see it rolled out early in the New Year.” Law360, October 2, 2014. DOL’s next regulatory agenda moved the expected date of the proposed regulations to February 2015. Of course, now, February has come and gone. 28
www.HRProfessionalsMagazine.com
Thirteen months later, we are still waiting for the shoe to drop but, do not doubt, drop it will: Just last month, President Obama stated that “his administration would soon release details of a highly anticipated reform to the nation's overtime rules.” Huffington Post, March 21, 2015. That same week, Secretary of Labor Perez testified before the House Education & the Workforce Committee that the proposed revisions would be released sometime this spring. Publication in the Federal Register of the proposed revisions – called a Notice of Proposed Rulemaking (NPRM) – is just the first step in a regulatory process that can take a year or more. Next, DOL must give the public an opportunity to submit comments on the proposed regulations. Finally, DOL must prepare a “preamble” responding to the public comments which is published in the Federal Register, along with an economic cost-benefit analysis and the Final Rule. When DOL last revised these overtime regulations during the Bush Administration, DOL published the proposed regulations on March 31, 2003, and received more than 75,000 comments during a 90-day comment period. The Final Rule was published on April 23, 2004 with an effective date four months later on August 23, 2004. If the Obama Administration publishes the proposed regulations by June of this year, and proceeds with equal speed as the Bush Administration, we can expect the revised overtime regulations to be final by July 2016, with an effective four months later in November 2016.
What changes will DOL make? There can also be no doubt that the DOL’s proposal will seek to narrow the overtime exemptions in an effort to ensure millions of additional employees become eligible for overtime pay. The easiest way to achieve this goal is to increase the minimum salary levels that employees must earn to qualify as an exempt executive, adminis-