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eLABORate: Department of Labor Issues New Proposed Overtime Rule

March 08, 2019

On Thursday, March 7, 2019, the United States Department of Labor (DOL) issued its long-awaited proposal to replace the Obama administration's controversial overtime rule. The DOL’s new proposed rule raises the minimum salary threshold required for workers to qualify for the Fair Labor Standards Act's "white collar" exemptions from $23,660 to $35,308 per year. The previous rule, proposed under the Obama administration in 2016, would have raised the threshold to $47,892. The Obama DOL endorsed increase was to have gone into effect in January 2017 but was temporarily enjoined by a Texas federal judge in November 2016 before being permanently blocked by the same judge on August 31, 2017.

Under the new rule proposed by the Trump DOL, workers who make less than $35,308 per year will be automatically eligible for time-and-a-half pay for all hours worked beyond 40 a week. In setting the new salary threshold, the DOL said it arrived at the $35,308 figure, or $679 a week, by applying the same methodology that was used to set the 2004 threshold. In addition to the increased salary threshold, the DOL also proposed regular increases to the threshold every four years, but only after a notice-and-comment period which would precede each regular increase. This was a departure from the 2016 Obama administration rule, which called for an automatic regular threshold increase without the opportunity for a notice-and-comment period.

According to the DOL, the new proposed rule will make an additional one million workers overtime-eligible. This expansion is more modest than the rule proposed by the Obama administration, which said at the time that rule was issued that it would cover about four million workers.

Notably, the DOL declined to make any changes to the so-called “duties test,” a set of factors used to determine whether workers making more than the salary threshold are entitled to overtime wages. The new proposed rule will allow employers to count certain nondiscretionary bonuses and incentive payments like commissions that workers receive for up to 10 percent of a worker's salary level.

The DOL is seeking public comments on the rule and estimates that the rule will take effect in January 2020.