On May 18, 2016, the U.S. Department of Labor (DOL) announced the publication of its final rule updating its existing overtime regulations. The updated regulations are scheduled to become effective on December 1 of this year and are predicted to extend overtime pay protections to over 4 million workers within the first year of implementation. The updates include a provision under which employees are eligible for overtime compensation if they work over 40 hours in a week and earn less than $47,476 per year—an over 100 percent increase from the current salary threshold of $23,660.
To soften the impact of those new regulations, Congressman Kurt Schrader (D-Ore.) introduced a bill—the Overtime Reform and Enhancement Act (OREA)— that would add to the regulations a phase-in provision, which would increase the salary threshold in steps over the next three years and would remove a current provision that increases the threshold salary automatically every three years without going through the normal rulemaking process specified under the Fair Labor Standards Act (FLSA).
If Congressman Schrader’s proposed bill succeeds, the threshold salary number would be increased only to $35,984 on December 1, 2016. The threshold would increase incrementally each year until reaching the $47,476 amount on December 1, 2019, which then would be the ceiling until a formal rulemaking process was engaged in to revise it further.
This proposed bill has the support of, among other groups, the National Retail Federation, the American Bankers Association, the Society for Human Resource Management, the U.S Chamber of Commerce, and numerous non-profit organizations that have stated that the new regulations will force them to serve a reduced number of recipients by causing labor costs to rise so dramatically and precipitously.
To become law, the OREA would have to be approved by both houses of Congress, and would then have to survive a presidential veto (or garner enough support to override such a probable veto). None of that is likely to proceed quickly. Congress now is on recess until after Labor Day, so any action on this issue cannot take place for at least 6 weeks.
Even if OREA were to be signed into law after that, it would not automatically overturn the rule scheduled to take effect in December. Instead, it would require the Secretary of Labor to further rewrite the existing regulation, which could take a substantial period of time (the last rewrite took nearly a year). The rewrite would not be finalized before the final rule’s current effective date of December 1, 2016.
While Congressman Schrader’s bill is not the only attempt to delay or revise the upcoming implementation of the new regulations, none of the recent attempts has gained enough momentum to push off the December 1, 2016 date or change the import of the rule.
Therefore, employers should continue planning for the existing rule change to become effective on December 1. In particular, employers should be aware of the change in threshold salary to $47,476 and should plan to pay overtime wages to employees who fall under that threshold. Finally, employers should work closely with human resources departments and legal counsel to effectively reclassify workers where necessary or revise wage levels to maintain current classifications.
