The Department of Labor (DOL) recently proposed to raise the minimum salary for employees to automatically qualify for overtime to a degree much less than its 2016 final rule on the matter. The department’s previous proposal drew criticism from businesses and an injunction from a federal court.
Under DOL’s notice of proposed rulemaking (NPRM), any employee making up to $679 per week (equivalent to $35,308 per year) would be required to receive overtime pay if they work more than 40 hours in a given week, based on their job duties. The current salary threshold for mandatory overtime is $455 per week ($23,660 annually), which has been in place since 2004.
DOL also proposed that any updates to the salary threshold be subject to a notice-and-comment rulemaking every four years, rather than done automatically. DOL did not propose any changes to the “duties test.”
The proposed threshold hike is based on average salaries projected through Jan. 1, 2020.
The new threshold would require companies to compensate millions more workers for extra time worked, but still far fewer than the department’s previous proposal.
The new proposal also does include a provision to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid annually or more frequently to satisfy up to 10 percent of the standard salary level. Bonuses and commissions are not currently counted as salary under the 2004 rule, and the changes first proposed in the 2016 rule brought some compliance concerns from the mortgage industry on payments to loan officers under the LO Comp rule.
DOL finalized a rule in 2016 to raise the minimum salary threshold to $913 a week ($47,476 a year) in 2016, more than 25 percent higher than its new proposal. A Texas district court stayed the final rule changing overtime mandates for workers. Judge Amos Mazzant III filed an injunction claiming DOL overstepped its bounds with the rule.
“With the final rule, the department exceeds its delegated authority and ignores Congress’ intent by raising the minimum salary level such that it supplants the duties test,” Mazzant wrote. “The department’s role is to carry out Congress’ intent. If Congress intended the salary requirement to supplant the duties test, then Congress, and not the department, should make that change.”
In November 2017, the Fifth Circuit Court of Appeals suspended further rulemaking regarding a revised salary threshold for mandatory overtime. Since the 2016 final rule was enjoined, DOL has continued to enforce the 2004 salary threshold.
In developing the proposal, DOL noted that it gathered public input during six in-person listening sessions and received more than 200,000 comments as part of a 2017 Request for Information (RFI).
“Our economy has more job openings than job seekers and more Americans are joining the labor force,” DOL Secretary Alexander Acosta said in a release. “At my confirmation hearings, I committed to an update of the 2004 overtime threshold, and today’s proposal would bring common sense, consistency, and higher wages to working Americans.”
“Commenters on the RFI and in-person sessions overwhelmingly agreed that the 2004 levels need to be updated,” DOL acting wage and hour administrator Keith Sonderling said.
The newly proposed rule satisfies many recommendations the American Bankers Association (ABA) suggested in its comment on the 2016 rule.
“[W]e believe that the department should continue to use the 2004 methodology as a mechanism for updating the salary level test and that there should be a single uniform salary for the EAP (executive, administration and professional) exemptions,” ABA wrote. “Like the department, employers should be permitted to include all forms of compensation in the determination of whether an employee has met the salary level requirement. We believe the department should retain the existing exemption components of ‘salary level plus duties’ with no changes to the duties tests. Finally, we strongly believe the salary level should be adjusted only through notice and comment rulemaking.”
The NPRM maintains overtime protections for police officers, fire fighters, paramedics, nurses and laborers, such as: non-management production-line employees and non-management employees in maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen and construction workers. The proposal does not call for automatic adjustments to the salary threshold.