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DOL Releases Final Overtime Ruling

Hannah Nequist on Thursday, May 26, 2016 at 12:30:00 pm 

Months of anxious waiting have come to an end – the Department of Labor (DOL) last week released the final revisions to its overtime exemption rule. The new rule, which takes effect December 1, doubles the exempt employee annual salary threshold from $23,660 to $47,476. DOL estimates that the change will impact 4.2 million workers.

Under current rules, full-time, salaried workers who make at least $23,660 per year may be exempt from overtime pay. DOL’s initial proposal would have increased that floor to $50,440, more than a 110% jump. Additionally, the proposal called for automatic increases to the salary threshold, a large bump on the “highly compensated employees” (HCEs) threshold ($100,000 – 122,128 annually) and also sought feedback for changes to the duties test and nondiscretionary bonuses.

The final ruling inches back from the proposed rule, but the threshold still remains more than double the current level, at $47,476, or $913 per week. The threshold for HCEs also soars to $134,004. The new thresholds will also be set to increase automatically every three years.

These changes come as a big win for labor groups, which have been pushing for an update to the current overtime rules. The hope is that the additional pay will help many laborers lift their families out of poverty – as proponents of the new rules claim the current salary threshold is too close to the poverty level for a family of four.

Many chambers and small business owners expressed concern over the problems that the new regulations may cause. They claim that rather than boosting pay, many workers will find their hours cut, benefits rolled back or flexibility decreased in order to avoid or offset having to pay additional overtime. The administrative burden is also of significant concern – with organizations having to assess each employee’s new eligibility, and in the case of those who will remain below the threshold, time and hassle of tracking and reporting time.

The Lubbock Chamber quickly expressed their “disappointment” over the final ruling, saying the federal government may have been hasty in making their decision before a study of the full economic impact could be done. Likewise, the Columbus Chamber issued their own statement of concern about the impact on small businesses and the workers they employ, also suggesting the Secretary of Labor should “conduct a detailed and extended economic analysis."

What’s next?

Compliance will be a major concern for businesses of all sizes, and many chambers will help educate their members. The Greater Des Moines Partnership and other chambers have already announced seminars and trainings around the new rules to help member businesses understand what they will be required to do – to assess their employees for raises, reclassification, or other changes.

Still, some hope to block or adjust the new rule before it goes into effect at the end of the year. Lawmakers in the House and Senate also introduced last week the Protecting Workplace Advancement and Opportunity Act, in order to ensure what they call a more “balanced and responsible approach” to updating the federal rules. House Subcommittee on Workforce Protections Chairman, Tim Walberg (R-MI) stated “Our nation’s outdated overtime rules are in need of modernization, but it must be done in a responsible way that doesn’t stifle opportunities for working families to get ahead.” Stay tuned to the ACCE Government Relations Division for more on that.

 In the meantime, several organizations have provided resources that may be helpful to chambers and their members:

Tags: Overtime, Policy, Department of Labor, Government Relations

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