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U.S. Department of Labor overtime rule update

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On July 25, the U.S. Department of Labor issued a formal request for information in preparation for drafting a proposed rule on salary levels for the white collar overtime exemptions.

The request for information notes that the pending order of the U.S. District Court in Texas called into question the DOL's authority to utilize a salary level test in determining the exempt status of executive, administrative and professional employees. The DOL is appealing that part of the District Court's order.

At this time, the DOL has decided not to advocate for the specific salary level ($913 per week) set in the 2016 Final Overtime Rule, and intends to undertake further rulemaking to determine what the salary level should be. In light of the pending litigation, the DOL has decided to issue this request for information, rather than proceed immediately to a notice of proposed rulemaking. The DOL believes that gathering public input now will greatly aid in the development of a notice of proposed rulemaking.

The request for information notes that, on Feb. 24, President Trump signed Executive Order 13777, "enforcing the regulatory reform agenda." Consistent with this Executive Order, the DOL is reviewing the impact of the 2016 Final Overtime Rule's changes, with a focus on lowering the regulatory burden.

Additionally, the request for information acknowledges the DOL's awareness that the standard salary level set in the 2016 Final Rule was too high.

The DOL is inviting comments on the 2016 revisions to white collar exemption regulations, "including whether the standard salary level set in that Rule effectively identifies employees who may be exempt, whether a different salary level would more appropriately identify such employees, the basis for setting a different salary level, and why a different salary level would be more appropriate or effective."

The DOL seeks comment and information on the following questions:

  1. Would updating the 2004 salary level for inflation be an appropriate basis for setting the standard salary level and, if so, what measure of inflation should be used?
  2. Should the regulations contain multiple standard salary levels? If so, how should these levels be set: by size of employer, census region, census division, state, metropolitan statistical area or some other method?
  3. Should the DOL set different standard salary levels for the executive, administrative and professional exemptions, as it did prior to 2004 – and, if so, should there be a lower salary for executive and administrative employees, as was done from 1963 until the 2004 rulemaking?
  4. Would a test for exemption that relies solely on the duties performed by the employee, without regard for the amount of salary paid by the employer, be preferable to the current standard test? If so, what elements would be necessary in a duties-only test, and what examination of the amount of non-exempt work be required?
  5. The 2016 Final Rule, for the first time, permitted non-discretionary bonuses and incentive payments (including commission) to satisfy up to 10 percent of the standard salary level. Is this an appropriate limit or should the regulations feature a different percentage cap?
  6. Should there be multiple total annual compensation levels for the highly compensated employee exemption? If so, how should they be set? By size of employer, census region, census division, state, metropolitan statistical area or some other method?
  7. Should the standard salary level and the highly compensated employee's total annual compensation level be automatically updated on a periodic basis to ensure they they remain effective, in combination with their respective duties test, at identifying exempt employees?

To view the full request for information and obtain instructions for submitting comments, visit the Federal Register website (http://tinyurl.com/yco2cssi). Note that written comments must be submitted on or before Sept. 25, 2017.

L. Michael Zinser is the founding partner of The Zinser Law Firm in Nashville, Tenn. The firm, which has a heavy concentration of clients in communications media, represents management in the area of labor and employment. Zinser can be reached at (615) 244-9700 or mzinser@zinserlaw.com.

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