A proposed Department of Labor rule update that would increase employee overtime costs for businesses is nearing publication, but in the meantime, it faces some congressional opposition.
Congress hasn’t seen the final rule yet, and neither have employers. That will happen after the completion of a review by the White House’s Office of Management and Budget, likely within the next few weeks — a faster pace than originally expected. However, the proposed rule released last summer called for changes that DOL estimated would make 4.6 million workers newly entitled to overtime protection, with average annualized direct employer costs totaling between $239.6 million and $255.3 million per year.
Those costs come from the proposed dramatic increase in salary requirement for overtime exemptions. If implemented as proposed, the rule will more than double the minimum salary threshold required to qualify for FLSA “white collar” exemptions, from $23,660 annually to $50,440 annually. The $50,440 salary is a projection that represents the 40th percentile of weekly earnings for full-time salaried workers. (To see a detailed description of the proposed changes, see our previous post here.)
Based on those numbers, Republicans in the House and Senate recently introduced legislation that aims to halt the rule’s advancement, pending a complete economic analysis on small businesses, nonprofit employers and other employers. Many industries, including retail, construction, convenience store and nonprofit organizations, have spoken in opposition and submitted public comments on the proposal. In addition to higher costs, employers have argued they would face substantial worker reclassifications, with workers potentially losing status and benefits as a result.
It remains to be seen how much the final version will differ from the proposed rule, but for employers, the accelerating timeline of these changes will be important to monitor. If implemented as proposed, employers will need to be prepared for worker reclassifications and a heightened administrative burden of tracking hours worked by the now non-exempt employees.