Overtime Regulations: One Step Closer to Change

Overtime Regulations: One Step Closer to Change

The Department of Labor (DOL) has proposed significant changes to overtime rules. (See blog post: Five Things to Know About New Overtime Rules).  Under the DOL proposal, published in July 2015, some 5 million more workers will qualify to be paid “time and a half” for working more than 40 hours a week.  The DOL’s proposal would increase the salary threshold for overtime eligibility from $23,660 annually to $50,440 (a 113% increase), which would be automatically updated annually. The proposal also contemplates a change in the “duties test” to determine overtime eligibility, but it’s not clear what the agency has in mind.  Last week, the DOL submitted its final rule to the Office of Management and Budget (OMB) for approval.  OMB now has 90 days to review the rule before a final version is published.  While we don’t know for sure what is in the final rule, Congress has responded with legislation to block it.

Since the publication of the DOL’s proposal last year, numerous concerns have been raised about the implications of changing the overtime rules as DOL envisions. Some worry that the rule will reduce workplace flexibility and that the one-size-fits-all approach doesn’t consider regional cost-of-living or industry-specific differences.  The cost of implementation and compliance, which many feel the DOL has underestimated, is also of concern. The proposal suggests that the “duties test” may be in need of reworking, but the rule doesn’t say how, so any change included in the final rule will not be fully vetted.  Since July, the DOL has had the benefit of a public comment period and congressional hearings to receive feedback on its regulation.  Since we haven’t seen the final rule yet, we don’t know if any of that feedback was sufficient to alter the DOL’s thinking and result in significant changes to the rule before it was finalized.  Some in Congress presume not.

Three days after the final rule was sent to the OMB for review, the House and Senate introduced legislation to repeal the proposal and lay out instructions on how DOL must proceed if it wants to issue any similar regulation.  The Protecting Workplace Advancement and Opportunity Act would:

1. Nullify the DOL’s overtime rule

2. Allow a “substantially similar” rule to be proposed only if certain requirements are met, including:

  • A full and complete economic analysis using improved data that, among other things,
    • addresses geographic cost-of-living differences;
    • analyzes the percentage of full-time workers affected, broken down by state, industry, small organizations and businesses, small governmental entities (including school districts), non-profits, and some health care providers;
    • considers the impact on lower wage industries, including by geographic area;
    • analyzes management and HR costs;
    • considers non-financial costs, such as the impact on workplace flexibility
  • Publication of a small business compliance guide
  • A public comment period of at least 120 days
  • An effective date that is at least one year after publication of a final rule

3. Require any future rule that changes the “duties test” to provide proposed regulatory language that is subject to public comment.

Even if the legislation is passed by the House and Senate, the President will not be inclined to undermine his administration by signing it.  Still, it would highlight for the OMB, as it reviews DOL’s work, the concerns that Congress and others have with the administration’s approach. Congress may also decide to invoke the Congressional Review Act (CRA) after the rule is finalized.  Under the CRA, Congress has 60 days to pass a resolution disapproving the regulation. Again, if any such resolution passed, it would likely face a veto from the President.  Some of these maneuvers may be pursued with some hope of delay.  The closer to the end of this (election) year that regulations are finalized, the more opportunity there is to overturn them when a new administration is in office.

Let’s remember that we don’t know for sure what the DOL’s final proposal looks like or what OMB will do.  By early summer, we should have more answers and the next steps will be more clear.