New Overtime Rules May Take Effect as Early as April or May 2016
In June of last year, President Obama announced the proposed rule that would raise the weekly minimum salary threshold required to qualify for the Fair Labor Standards Act's overtime, or “white collar” exemption from $455 to $970, or $23,660 to $50,440 annually. Among other changes under the proposed rule, employees who currently meet the “duties” test under one or more of the executive, administrative, professional or other exemptions but whose salaries are below $50,440 per year will be reclassified from exempt to non-exempt from the overtime provisions of the Fair Labor Standards Act (FLSA). Employers will need to keep time records for these employees and pay overtime at the rate of 1.5 times the employee's regular rate of pay for each hour over 40 the employee works in a given work week.
The new regulations also mandate that the $50,440 salary be tied to a fixed percentage of wages or to the Consumer Price Index (CPI) to guard against inflation. This means the salary threshold could increase along with the CPI. The DOL has argued for this automatic increase by pointing out that the last time a change was made, it was 2004 – so the salary threshold has not kept up with the times. It is estimated that under the new regulations, an additional five million formerly exempt employees will now be legally entitled to overtime if they work more than 40 hours in a workweek.
DOL Submits Rules to OMB
Last week the DOL submitted the proposed rules to the White House's Office of Management and Budget (OMB), the last step before the rules become effective. OMB typically reviews rules in a couple of months, so employers could be looking at a new rule before the summer. Previously, the final rule was not expected until at least July 2016.
There is wide speculation that the OMB's review of this rule will be expedited, in an effort to avoid a challenge under Congressional Review Act (CRA). The CRA gives Congress 60 legislative days to “disapprove” new regulations issued by federal agencies. In a joint resolution of disapproval, Congress could overrule the regulation by a simple majority vote. The President, however, has the opportunity to veto the resolution of disapproval and then Congress would have to override the veto by a supermajority or two-thirds vote. There is a unique “carryover” provision of the CRA that is complicated but requires if the new rule is not submitted to Congress by approximately May 16, 2016, it will be subject to renewed review period in 2017 by a new President and Congress.
Have Questions about Overtime Rules?
Should you have questions about the DOL's proposed overtime rules or white collar exemptions, don't hesitate to contact leading California employment lawyers at Kingsley & Kingsley. Call and speak to an experienced California lawyer toll-free at (888) 500-8469 or click here to contact us via email.