- On July 26, 2017, the DOL released a request for information (RFI) soliciting public comments on the regulations that define exemptions from the Fair Labor Standards Act’s (FLSA) minimum wage and overtime requirements for certain white-collar employees.
- The DOL is expected to use the information gathered from the RFI to formulate a proposal to revise the regulations.
- The Final Overtime Rule, released on May 23, 2016, was to have taken effect on December 1, 2016, but a U.S. district court temporarily enjoined the rule; a DOL appeal to the injunction is pending.
- The Final Rule, if enforced, would raise the weekly salary level exempting certain white-collar employees and highly compensated employees from the FLSA’s minimum wage and overtime provisions, and introduce a tri-annual increase of such salary levels.
RFI a first step toward revising exemptions from federal minimum wage and overtime requirements
On July 26, 2017, the Wage and Hour Division of the U.S. Department of Labor (DOL) released a request for information (RFI): Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees. The RFI solicits public comments on the regulations that define and delimit exemptions from the FLSA’s minimum wage and overtime requirements for certain white-collar employees. The DOL indicates that it intends to formulate a proposal to revise the federal overtime regulations.
On May 23, 2016, the DOL released a Final Overtime Rule with an effective date of December 1, 2016, which would have raised the weekly salary level exempting certain white-collar employees and highly compensated employees from the FLSA’s minimum wage and overtime provisions, and introduce a tri-annual increase of such salary levels.
However, before the Final Overtime Rule took effect, it was challenged and temporarily enjoined by the U.S. District Court of Eastern Texas. The appeal of the injunction is pending, with the DOL’s final reply brief indicating they would not advocate for the higher salary level in the rule but instead intended to undertake further rulemaking to determine the appropriate salary level. As a result, the DOL decided to issue an RFI, an optional step in the formal rulemaking process, rather than proceed immediately to a notice of proposed rulemaking, while awaiting further action from the court.
Businesses opposed the Final Overtime Rule
Businesses nationwide opposed the now-halted overtime rule released under the Obama administration in part because it was expected to automatically extend overtime pay eligibility to 4.2 million workers. If enforced, the rule would:
- Raise the salary threshold exempting certain employees from overtime protections. The threshold went from $455/week to $913/week — that’s an annual salary of $47,476 for an employee who works the whole year;
- Allow employers to apply nondiscretionary bonuses and other incentive pay toward up to 10 percent of the salary threshold when those payments are made at least quarterly;
- Increase the annual salary amount for employees to meet the highly compensated employee exemption from overtime from $100,000 a year to $134,004 a year; and
- Automatically update the salary threshold and annual compensation for these exempt positions every three years, based on wage growth over time.
Many employers made staffing and salary adjustments in preparation for the rule, in advance of the scheduled effective date and before the nationwide injunction.
11 questions for public comment
DOL leaders believe that the information gathered from the RFI will assist them in developing a notice of proposed rulemaking. Consistent with President Trump’s Executive Order 13777, “Enforcing the Regulatory Reform Agenda,” the DOL is reviewing the impact of the 2016 Final Overtime Rule with a focus on lowering the regulatory burden.
The RFI poses 11 questions to the public seeking comments, information, and data around the following:
- Whether the standard salary set in the 2016 Final Rule effectively identifies employees who may be exempt;
- Whether a different salary level would more appropriately identify such employees;
- The basis for setting a different salary level; and
- Why a different salary level would be more appropriate or effective.
The nature of the questions in the RFI suggest the DOL may be considering a more complex solution to setting salary levels, one based on geographic areas likely in response to comments provided during the public comment period for the 2016 Final Overtime Rule. While perhaps a more equitable solution given the disparity in geographic standards of living, the application of such a standard might be more difficult than the current scheme, especially for employers with employees located across the country.
Review the DOL’s request for information and the questions posed to the public online. Public comments are due on or before September 9, 2017.
Employers are reminded to continue compliance with the existing federal overtime regulations as well as applicable state requirements that may incorporate salary levels that exceed the federal level.
Paychex will monitor this situation and communicate developments as they occur.