Proposed Federal Overtime Rules on the Move
As previously reported, the Department of Labor (DOL) has announced proposed changes to federal overtime rules under the Fair Labor Standards Act (FLSA). This week, the DOL sent its new overtime rule to the White House Office of Management and Budget (OMB). The rule can be tracked on reginfo.gov.
The comment period for the overtime rule closed on September 4, 2015 with 293,370 comments received. By contrast, the agency only received 75,280 comments the last time changes were made to the overtime rule in 2004.
So what is the process now?
At this stage, the draft final rules are reviewed by the OMB when they are considered “economically significant” — which is the case here. The review includes a final analysis of estimated costs and benefits and may take into consideration the public comments. The period for review by the OMB is generally limited to a maximum of 90 days, although extensions are possible. There is no minimum period for review.
After the OMB review, a final rule is published in the Federal Register. If no specific date is set for compliance, final rules that have a significant effect, like this one, cannot go into effect until 60 days after publication in the Federal Register. During this period of time, Congress is allowed to review the rule under the Congressional Review Act. Since the start of this process in 1996, Congress has only disapproved one rule.
The DOL could also choose to set an effective date for compliance with the rule that is farther out than 60 days.
Assuming the OMB took the full 90 days for review, the overtime rule would not be published in the Federal Register until mid- June. If the rule were to take effect 60 days after publication (and the DOL did not select a later effective date), we could be looking at a final rule before Labor Day.
If the proposed rules become effective in 2016, the proposed minimum salary level is projected to increase to $970 per week ($50,440 annually).Those employees earning less than this amount would be nonexempt. This change would greatly increase the number of employees entitled to overtime. It would also decrease the ability to have exempt part-time positions.
How would this increase affect California employers? The proposed federal salary threshold is higher than the current salary threshold in California. Under the proposed federal rule, more California employees would potentially be nonexempt under the FLSA and entitled to overtime because they don’t meet the federal minimum salary threshold.
Currently, to be exempt in California, an employee must earn a minimum monthly salary of two times the state minimum wage, which amounts to $3,466.67 per month and $41,600 a year.
For example, if the proposed rules go into effect in 2016:
- Employees making less than $50,440 would be nonexempt under federal law and entitled to overtime under the FLSA rules;
- Employees making less than $41,600 could also be nonexempt under California law; and
- Employees making more than $41,600 but less than $50,400 could be exempt under California law but nonexempt under federal law and entitled to weekly overtime under the FLSA.
Employers must comply with the law that gives the most protection to the employee.
More information can be found on the DOL proposed rulemaking website.