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New FLSA White-Collar Overtime Exemption Rules Are Coming...Maybe Sooner Than You Think!

by Martin Salcedo, Esq. - The Human Equation on 4/14/2016
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It’s been over two years since President Obama directed the Department of Labor (DOL) to update the ‘white-collar’ overtime exemption regulations under Fair Labor Standards Act, including the executive, administrative and professional exemptions. It’s been nearly a year since the public was first given an opportunity to see and comment on the DOL’s proposed revisions. (The DOL received 293,389 comments.) Now, it seems we are one (huge) step closer to new white-collar overtime exemption rules becoming a reality.

On March 14, 2016, the DOL’s final version of the revised overtime exemption regulations was submitted to the White House's Office of Management and Budget (OMB) for review. Once the OMB completes its review, the final regulations will be published. After that, it’s just a matter of time.

Despite nearing the end of this long process, there are some details we still don’t know about the final regulations. Minor details, really, like what they are or when they will go into effect.

What are the final regulations?

No one really knows. The new overtime exemption regulations will not be made public until the OMB completes its review. Few details have leaked or been disclosed, so everyone is still guessing (worrying) about how things will change. Many expect the final regulations to be identical or very similar to the proposed regulations issued in July 2015, including the DOL’s proposal to:

  • increase the minimum salary requirement for white collar exemptions from $455 per week ($23,660/year) to $921 per week ($47,892/year);
  • increase the minimum compensation requirement for the Highly Compensated Employee exemption from $100,000 to $122,148 per year; and
  • automatically update the new minimum salary and compensation levels annually.

Some are concerned the final regulations may include additional changes, particularly the duties test used to determine eligibility under the current white-collar exemptions. Recall that in the proposed regulations, the DOL asked for comments about whether changes need to be made to the duties tests. Though the DOL specifically stated that it’s not proposing any specific regulatory changes to the duties test, we don’t know for sure.

When will the final regulations become effective?

This is also uncertain, but it may be sooner than initially expected. When the final regulations are published, they will include an effective date. These are major regulations, so the effective date cannot be less than 60 days after publication. Though it can be more than 60 days, the Solicitor of Labor has indicated that the effective date will be 60 days after they are published.

But, before the final regulations can be published, they must be reviewed. The OMB generally has 90 days to review regulations, which would put the deadline near the middle of June. However, because of the upcoming election, the middle of May is probably the OMB’s real deadline. Here’s why.

Under the Congressional Review Act, Congress is generally given 60 days to review and disapprove a major rule, like the DOL’s new overtime exemption regulations. However, the Congressional Review Act makes an exception for “midnight rules” that are issued toward the end of an administration. If a rule is issued too late, the 60-day review period essentially resets to give the next session of Congress an opportunity to review and disapprove the rule.

The current administration does not want this to happen, so the OMB must complete its review before the date on which the Congressional Review Act’s reset provision is triggered. Otherwise, the new overtime exemption regulations would be at the mercy of the next Congress and a new president.

According to calculations by the Congressional Research Service, this date is estimated to be May 16, 2016.

This date was calculated using projected congressional schedules, so it’s only an estimate that may change. Nevertheless, if we assume the final regulations are published by the May 16, 2016, and add 60 days (the anticipated effective date), the new regulations could become effective around July 15, 2016, maybe even sooner!

That doesn’t leave much time to prepare. The July 2015 proposed regulations may be a useful guide, but without knowing exactly what will be required under the final regulations, it’s too early to finalize any plans. In case there are any surprises, response plans should be flexible and capable of adapting to possible contingencies. Nevertheless, employers should start preparing now for potentially significant changes in the very near future.

Additional information about various employment related liabilities is available in The Human Equation’s library of online HR Training. Please contact us if you would like to discuss ways to address and prevent various employment-related liabilities.

The Human Equation prepares all risk management and insurance content with the professional guidance of Setnor Byer Insurance & Risk.

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Categories: 2016


5/13/2016 12:02:20 PM #

This is helpful!

Erin Brennan | Reply

6/15/2016 9:12:56 AM #

New White Collar Overtime Exemption Rules Are Coming...Now What?

New White Collar Overtime Exemption Rules Are Coming...Now What?

The Human Equation News | Reply

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