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Newsletter > May 2019 > "Overtime Regulation Revamp Continues Forward Under Trump Administration With Two Notices of Proposed Rulemaking"
Overtime Regulation Revamp Continues Forward Under Trump Administration With Two Notices of Proposed Rulemaking
John Christopher, Manley Burke, email@example.com
On Thursday, March 7th, the Department of Labor published a proposed rule which, if implemented, would substantially modify the rules governing overtime pay—including increasing the salary threshold for overtime exemption from $23,660 ($455/week) to $35,308 ($679/week). The current salary threshold of $23,660 was implemented in 2004 and has remained unchanged since then.
The prior administration similarly sought to substantially modify the salary threshold in 2016, raising it to $47,476 and providing for the threshold to increase every three years. That proposal never become effective as a result of an injunction issued by a Nevada federal court.
In addition to increasing the salary threshold, this latest proposed rule change includes the following:
- Allows the inclusion of certain nondiscretionary bonuses and incentive payments to count toward up to 10 percent of the salary threshold—the current rule excludes these types of compensation;
- Increases the salary threshold for “highly compensated employees” from $100,000 to $147,414 (approximately $13,000 higher than previously proposed level); and
- Commits to consider modifications to the earnings thresholds every four years—each proposed modification would be subject to a comment period during which the public may provide feedback on the proposed modification. In contrast, the 2016 proposal called for regular predetermined increases to the salary threshold without public comment.
Exemption from overtime has two factors. The above described salary test, and a duties test. As with the prior proposed rule change, the duties test will remain unchanged.
Following closely on the heels to the above proposal, the Department of Labor published another proposed rule change to overtime pay on March 28th, seeking to clarify the circumstances under which certain employee benefits, including tuition and travel reimbursements, unused paid leave, and meal breaks, may be excluded from the calculation of an employee’s regular rate of pay. The Fair Labor Standards Act requires employers to pay nonexempt employees an overtime rate of one-and-a-half times their “regular rate of pay” for all hours worked in excess of forty (40) hours in a given week. The current rule requires all “remuneration for employment” be included in the in the regular rate of pay determination, with the exception of seven narrow categories of remuneration.
The proposed rule would expand upon those seven categories to specifically exclude certain additional categories of remuneration from the determination of an employee’s regular rate of pay. Those additional categories include:
- Pay for forgoing holidays or leave;
- Compensation for bona fide meal periods;
- Reimbursed travel and business expenses; and
- Tuition reimbursement, among many others .
The proposed rule change would allow employers to exclude remuneration falling under the new categories from the regular rate of pay calculations, provided those benefits are not tied to the employee’s hours worked or services rendered.
The proposed rules changes are anticipated to become effective in 2020. However, as learned with the previous administration’s proposal, legal challenge should be expected. In fact, the legal challenge to the previous proposal continues and the new proposal is likely to face legal challenges of its own.
1See John Christopher, Proposed Overtime Regulations Would Significantly Limit Overtime Exemptions, Fraternal L. (July 2015).
2See Sean Callan & Jacklyn Olinger, Federal District Court Blocks New Overtime Rule, Fraternal L. (Nov. 2016).