The U.S. Department of Labor (DOL) recently published its spring regulatory agenda containing a tentative date of October 2022 for a proposed overtime rule. The proposed rule will advise businesses on implementing the exemption of bona fide executive, administrative, and professional employees from the minimum wage and overtime requirements of the Fair Labor Standards Act (FLSA).
Although the specifics of the proposed rule remain unknown, many advocates expect several changes to specific aspects of the existing rule.
Adjusting the Salary Level
Under the current overtime rule, the maximum annualized salary rate is $35,568. As a result, employees who make less than $684 per week are eligible for overtime pay at a rate of one and one-half times their regular rate, for any hours worked over forty during a work week. The DOL is feeling pressure to raise the salary rate to the level that the Obama administration tried to establish, or $47,476. A court prevented that increase in the salary rate from going into effect in a 2016 decision, finding that the DOL had exceeded its authority in raising the rate too high. Some advocates seek a rate more than double the current rate.
Creating an Automatic or Annual Salary Level Increase
One way to ensure that the maximum annualized salary for the overtime rule adjusts automatically is to tie it to the consumer price index or another economic indicator. Adding this measure to the annualized salary figure would allow the amount to increase naturally without the DOL having to go through the formal rulemaking process. This step also may help avoid litigation over the issue by avoiding dramatic increases in short periods.
Amending the Duties Test
An employee must make more than the maximum annualized salary to meet FLSA’s overtime exemption, but that employee also must meet the duties. In other words, the employee’s job duties must fall within the classification of the exemption that applies to their job or the duties of the professional, administrative, or executive exemption.
The DOL has considered modifying the duties test in the past but has refrained from doing so. Some have suggested that the DOL amend the duties test to align with the California standards for overtime exemptions. Under California state law, employees must spend more than 50% of their time performing exempt duties to be classified as exempt from overtime requirements.
HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.
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