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Department of Labor Proposes to Guarantee Overtime Pay to Workers Earning Less than $50,440 Annually

The Department of Labor issued proposed rules yesterday, to address President Obama’s 2014 Presidential Memorandum calling for an update to the overtime regulations, to “modernize and simplify” them while ensuring that the “intended overtime protections are fully implemented.”

The proposed rules would raise the threshold under which workers are guaranteed overtime, from the current $455 a week ($23,660 a year) to $970 a week ($50,440 a year) in 2016. Going forward, the DOL also proposes to automatically update the salary threshold based on inflation or a fixed percentile of earnings.

Notably, the proposal does not recommend changes to the “duties test” and the DOL reiterated its position that as salaries rise, a less robust examination of the employees’ duties is needed. It stopped short, however, of abandoning the duties test altogether, stating “[w]hile the salary provides an initial bright-line test for [overtime] exemption, application of a duties test is imperative to ensure that overtime-eligible employees are not swept into the exemption.” As part of the rule making process, the DOL is seeking comments on the following issues:

  1. What, if any, changes should be made to the duties tests?
  2. Should employees be required to spend a minimum amount of time performing work that is their primary duty in order to qualify for exemption? If so, what should that minimum amount be?
  3. Should the Department look to the State of California’s law (requiring that 50 percent of an employee’s time be spent exclusively on work that is the employee’s primary duty) as a model? Is some other threshold that is less than 50 percent of an employee’s time worked a better indicator of the realities of the workplace today?
  4. Does the single standard duties test for each exemption category appropriately distinguish between exempt and nonexempt employees? Should the Department reconsider our decision to eliminate the long/short duties tests structure?
  5. Is the concurrent duties regulation for executive employees (allowing the performance of both exempt and nonexempt duties concurrently) working appropriately or does it need to be modified to avoid sweeping nonexempt employees into the exemption? Alternatively, should there be a limitation on the amount of nonexempt work? To what extent are exempt lower-level executive employees performing nonexempt work?

It is difficult to predict to what extent the final rule will include changes to the duties test, but given the DOL’s request for feedback, and its decision to maintain the duties test as part of the exemption analysis, some changes are likely.

The 60-day comment period begins when the proposed rule is published in the Federal Register. We will continue to keep employers updated but in the meantime, if you have any questions regarding the proposed rule, please contact a member of Verrill Dana’s Labor & Employment Department.

Topics: Agency Notices and Advisories
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