Employers nation-wide, get ready to raise your voice: the U.S. Department of Labor has issued a Request for Information on 2016’s highly contested “overtime rule,” asking stakeholders to provide comments that will be used to shape a future revision of the rule. The RFI is available for preview here, although the comment period does not begin until Wednesday, June 26.
Although the Fair Labor Standards Act requires most covered employees to be paid time and a half for all hours worked over 40 in a workweek, it exempts from this standard “any employee employed in a bona fide executive, administrative, or professional capacity.” Exemption has traditionally been determined both by the employee’s duties and by their salary level, as determined by regulations.
The 2016 rule raised the salary level at which certain employees may be exempt from overtime rates from $455 per week to $913 per week. While the salary level had gone unchanged for over a decade, prompting some to suggest that an update was due, many employers were taken aback at the sudden prospect of more than doubling the salary threshold, which would have resulted in 4.2 million employees becoming eligible for overtime pay.
Although the rule was scheduled for December 1, 2016, a federal court issued a temporary injunction to prevent it from going into effect while it was being argued in court. The rule is currently being challenged in both the Fifth Circuit Court of Appeals and the U.S. District Court for the Eastern District of Texas. On June 30, 2017, the Department of Justice submitted a brief requesting that the Fifth District reaffirm the Department of Labor’s authority to establish a salary level test, arguing that the plaintiffs “offer no basis to call into question a regulatory test that has been in place since FLSA’s inception.” However, the DOJ brief also specified that the DOL did not intend to defend the $913 per week exemption level set by the 2016 rule, asking the court not to “address the validity of the specific salary level set by the final rule ($913 per week), which the department intends to revisit through rulemaking.”
In the newly-issued Request for Information, the DOL affirms this position and asks for public input to inform future rule-making to propose a new salary level test. Specifically, the DOL has released 11 categories of questions that stakeholders should address in their comments, relating to the standards which should be adopted or discarded when setting the standard salary level, whether there should be multiple standard salary levels (determined by categories such as size of business, census region, or some other method), the effects an increased salary level might have on the standard duties test, and whether it would be preferable to have exemption be determined entirely on duties.
The RFI also asks employers about their behavior in anticipation of the 2016 rule’s effective date, such as whether they “[increased] salaries of exempt employees in order [to] retain their exempt status, [decreased] newly non-exempt employees’ hours or [changed] their implicit hourly rates,” or made changes to limit employee flexibility or salaried status. In particular, the DOL asks whether small businesses encountered “unique challenges” when preparing for compliance with the new regulations.
Although the questions asked suggest a wide range of possibilities for the future rule revision, based on public input, the DOL does signal a particular interest in the role that local cost of living plays in the impact of the uniform salary level. In their introductory material, they note the “concerns expressed by various stakeholders… that the salary level would adversely impact low-wage regions and industries,” and several questions ask whether there should be multiple salary levels for the executive, administrative, and professional exemptions and the highly compensated employee exemption, “using a percentage based adjustment like that used by the federal government in the General Schedule Locality Areas to adjust for the varying cost-of-living across different parts of the United States.”
The Request for Information on the Overtime Rule will be published in the Federal Register on July 26, 2017. Interested parties will have 60 days to comment, either on electronically on http://regulations.gov or by mail. All comment submissions must include the agency name and Regulatory Information Number (RIN 1235-AA20) in order to be considered.