05/18/2016

Final DOL Overtime Rule Announced

Share Your Concerns

ASAE has announced that the White House announced the publication of its final overtime rule, which the Administration says will extend overtime eligibility to more than 4 million additional workers within the first year of implementation.

The rule, which will be effective December 1, significantly increases the minimum salary level for “white collar” employees to qualify as exempt from overtime pay requirements.  Under the new rule, no employee who has a guaranteed salary of less than $47,476 will qualify as exempt under the executive, administrative, or professional exemptions. That’s more than double the current minimum salary level of $23,660 and only slightly lower than the Labor Department’s proposed $50,440. The rule will not affect hourly or other non-exempt workers, who already are eligible for overtime pay. 

Additionally, the final rule includes a mechanism for automatically updating the salary threshold every three years (a change from the proposal of yearly adjustments). The next automatic update to the salary threshold would be on Jan. 1, 2020, and the new salary level will be announced 150 days before it takes effect.  The minimum salary level is set based on the 40th percentile of wages of full-time salaried employees in the lowest wage Census region (currently, the South).

If you are concerned about the impact of the overtime rule on your organization, we strongly urge you to contact your elected representatives in Congress and share how this change will affect your association’s bottom line and ability to carry out your mission. Click here to access ASAE’s Engage portal to send a message to your legislators. 

Importantly, the Labor Department decided not to make changes to the “duties test,” part of the three-pronged test for establishing exemption from overtime eligibility. In a draft rule released last year, DOL hinted that it might limit the definition of “primary duty” to duties on which an exempt employee spends 50% or more of his or her working hours. In many situations, that would have meant that employers would need to track the hours and tasks of exempt employees to ensure that they had accurately identified the employee’s primary duty. So with no changes to the duties test, the basic test for determining who in your organization remains exempt from overtime eligibility under the executive, administrative, or professional exemptions is as follows:

-          The employee must make over the new salary threshold of $47,476;
-          The employee must be salaried;
-          The employee must perform exempt duties (executive, administrative, or professional). 

In reviewing the final rule, ASAE continues to believe that the salary threshold is set too high, and that the minimum salary level for exempt employees should instead be keyed to government data on regional cost-of-living differences. Nonprofit employers, colleges and universities, retail and restaurants are among the entities likely to be hit especially hard by this drastic expansion of overtime eligibility. The Labor Department has prepared a fact sheet confirming that there is no exemption from overtime requirements for nonprofit employers. The fact sheet does outline some options for nonprofit employers to comply with the new salary threshold.  In addition, the DOL has stated that, as an enforcement policy, it will consider many graduate and undergraduate research assistants and administrators at colleges and universities as exempt.  More information on that enforcement policy can be found here.

ASAE had shared its concerns extensively with the Labor Department and the Office of Management and Budget prior to the release of a final rule, but will now shift its focus to a potential legislative solution from Congress. Because President Obama has signaled a willingness to veto any attempt to block enforcement of the final rule, any legislative solution is likely to be successful only if it has broad support from Congress.

For more information about the overtime rule and how organizations can prepare before the Dec. 1 effective date, visit our Power of A site at http://www.thepowerofa.org/2016/05/final-dol-overtime-rule/. 

ASAE will continue to work toward a legislative solution to keep DOL’s overtime rule from taking effect in December, and will continue to share updates on this important issue as they become available. If you have questions about this issue, please contact ASAE’s Public Policy team at publicpolicy@asaenet.org or call 202-626-2703.