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New DOL Proposal Would Greatly Increase Number of Employees Eligible for OT Pay

On March 7, 2019, the Department of Labor (DOL) issued a proposed rule that would increase the salary level threshold for “white collar” exemptions under the Fair Labor Standards Act (FLSA) from the current level, $23,600, to a proposed level of $35,308.

Although significant, it is still considerably less than the failed proposal of the Obama Administration to increase the salary threshold to $47,476. According to the DOL announcement, the proposed increase would expand overtime eligibility by more than one million additional United States workers. By contrast, the Obama Administration proffered that its proposal to increase the salary threshold to $47,476 would have expanded overtime eligibility by four million additional workers.

The proposed rule does not include automatic adjustments to what would be a new salary threshold. However, the DOL proposed that the salary level be updated every four years through notice and comment rulemaking. Once the new proposal is published in the Federal Register, the DOL’s Notice of Proposed Rulemaking will be subject to a 60-day public comment period.

It is noteworthy that the proposed change does not revise the “substantive duties” test, which also must be satisfied in order for an employee to fall within one or more of the executive, professional, or administrative exemptions to the FLSA.

Despite the fact that the proposed salary threshold is lower than the threshold proposed by the Obama Administration, it is likely to prompt a cascade of complaints from employer groups and quite possibly lawsuits.

Regrettably, the proposed overtime rule does nothing to address the significant confusion that the existing overtime rules engender. Many of the substantive duties standards are outdated, and not in sync with the practical realities of the modern workplace.

Although it remains to be seen whether this new proposal will ultimately become law, employers should not wait until that determination is reached before considering the following:

  1. Carefully review the job positions and job descriptions of their current employees to determine whether the employees are being properly characterized as exempt. This undertaking should be done under the guidance and direction of outside employment counsel in order to better ensure that the characterizations are being properly made, particularly in light of the significant consequences of mischaracterization.
  2. If a decision is made to limit the number of hours that a non-exempt employee can work, then a decision also needs to be made regarding whether and to what extent to reassign certain work duties to other employees.
  3. The possible availability of overtime pay for employees not previously eligible to receive it should prompt consideration of hiring additional employees to reduce the likelihood that any employee will need to work overtime.
  4. The extent to which increased overtime obligations will impact the employer’s financial ability to fund other company benefits.
  5. Exploring insurance coverage for overtime claims.

Marc Engel is an employment attorney experienced in providing successful strategies for managing employees and preventing employment claims. For more information, contact Marc at 301-657-0184 or mrengel@lerchearly.com.

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