In 2016, the Obama administration’s Labor Department proposed a change to the overtime rule in the federal Fair Labor Standards Act. That change would have increased the exempt salary threshold, which is the minimum amount employees must earn in order to be classified as exempt from the FLSA’s overtime requirement. However, the change was blocked by an appellate court. Now, the Trump administration’s DOL is considering its own changes to the overtime rule, and employer and employee groups testified about their concerns at an Oct. 17 hearing at the DOL.
The 2016 rule would have increased the exempt salary threshold from its current level of $23,660 to $47,476, or nearly double. (To be exempt, workers not only meet the salary threshold but must also meet a specific exemption, such as the executive, administrative or professional exemptions defined in the FLSA.)
If the 2016 rule had gone into effect, many employers would have had to choose between raising salaries in order to maintain existing employee exemptions or reclassifying those employees as non-exempt, entitling them to overtime. According to employer groups, this would have resulted in additional labor expenses. One employer representative claimed that, in response to the 2016 proposal:
- 6.4 percent of employers said they would have to cut positions
- 12.4 percent of employers would reduce annual bonuses
- 21 percent of employers said they would limit flexible working hours and other alternative working arrangements due to concerns that non-exempt employees would work off the clock in violation of the FLSA
While supporting a smaller increase to the exempt salary threshold, the National Association of Counties said that nearly doubling it would have hit rural communities especially hard and might have resulted in employee benefit or service cuts. It recommended that the DOL let any rule lag by a year to give employers time to adapt.
Employee groups and others urge a rule similar to the 2016 proposal
An Economic Policy Institute economist who was the DOL’s chief economist between 2014 and 2017 urged the agency to discontinue current rulemaking and stand behind the 2016 rule.
An attorney who represents employees said that some exempt workers he has represented have qualified for food stamps and subsidized school lunches. He argued that an exempt salary threshold this low requires a stricter duties test to be fair. The AARP agreed, arguing that the DOL should reinstate the longer, more stringent duties test it dropped in 2004. That test required workers to perform qualifying “exempt” duties at least 80 percent of the time to remain exempt.
The DOL will take these views into account as it continues to develop a new proposal. No date for such a proposal has been announced.