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New Federal Overtime Rules Finally Rolling Out?

Unless you were hibernating for all of 2016, you know the federal Department of Labor (“DOL”) was set to release a new overtime rule for the white-collar exemptions that would have doubled the salary threshold.  The rule, however, was suspended by a federal court in November 2016 and ultimately struck down. The pending issue is just how much salary will you have to pay certain otherwise exempt employees, to maintain their exempt status.   The answer will come through a slow and winding path.

After a lot of maneuvering, in July 2017, the DOL sought public comment on a revised overtime rule.  The comment period closed in September 2017.   Over a year later, in October 2018, the Trump administration finally jumped in and announced its intent to issue a Notice of Proposed Rule Making in January 2019, to “determine what the salary level for exemption of executive, administrative, and professional employees should be.” Making good on its promise, the DOL sent its Notice of Proposed Rule Making to the White House Office of Management and Budget (“OMB”) for review on January 11, 2019.  The OMB is the final step before publication of the proposed rule in the Federal Register.

Employers will not be privy to the contents of the proposal until OMB approves it for publication in the Federal Register which is likely to happen in March 2019.  Many commentators, however, expect the salary threshold will be set in the low-to-mid $30,000 range.  At present, the threshold is $23,660 or $455 a week.  

For employers in New York State, this announcement is of little significance since the salary threshold under State law is drastically higher than under Federal law – current or proposed!  However, employers outside of New York State should take the time to identify which of their employees, if any, will no longer meet the salary threshold and therefore lose their exempt status.  While doing this, you might want to consider a full pay equity study (reviewing your entire pay structure and its innate fairness/legality) so you are not playing catch up when the new rule is finalized.  As part of this analysis, you will see how to address this mandated increase in wages and determine if the result will cause wage compression between the exempt staff with newly increased salaries and those not directly impacted by the increase.   You may find you have unavoidably opened a major can of worms.  If so, reach out to competent counsel before your actions create costly problems for your company.

Brody and Associates regularly advises management on complying with state and federal employment laws including wage and hour laws.  If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.454.0560.