U.S. Department of Labor Sends Proposed Overtime Rule to the White House

From PA Chamber of Business & Industry

The U.S. Department of Labor recently sent a proposed rulemaking regarding “white collar” overtime exemptions to the White House Office of Management and Budget.

The proposed rule is intended to replace the final rule issued in 2016, which would have more than doubled the minimum salary level for exempt white collar employees from $455 a week (23,660 annually) to $913 a week ($47,476 annually).  When the rule was initially issued, the U.S. Chamber led a lawsuit of 55 business groups that challenged the DOL’s redefinition of who qualifies as an “exempt employee,” and a federal court issued a permanent injunction that blocked the rule from taking effect.  The Trump administration, which appealed that decision to the U.S. Court of Appeals and obtained a stay of the appeal, has long been expected to introduce an alternative, and more reasonable, overtime rule update.

The period for review by the OMB office is generally limited to 90 days, though that timeline could be extended 30 days by the OMB Director and indefinitely by the head of the rulemaking agency (in this case, the DOL).  Employer advocates have expressed concern that inaction could lead the court to reverse the injunction if the DOL doesn’t finalize a new rule before the 2020 presidential election and President Trump doesn’t win a second term – a scenario that would result in a $48,000 salary threshold being implemented.

According to the National Law Review, while the department has pressed the pause button on this rulemaking since President Trump took office, Labor Secretary Alexander Acosta has repeatedly indicated that he favors some increase in the minimum salary threshold for exemption, which was last raised in 2004.  The Trump administration has formally announced its intention to issue a March 2019 rulemaking and some policy experts anticipate that the DOL will set a salary level in the low-to-mid-$30,000’s, using methodology established in 2004.

As this has played out at the federal level, the PA Chamber was heavily engaged last year in combatting overtime rule changes at the state level.  Last year, the Wolf administration proposed a more than 100 percent increase in the minimum salary threshold to qualify for “overtime exempt” status and also required regular increases to the threshold.  The PA Chamber led an effort to solicit comments from businesses throughout Pennsylvania in response to this ill-advised proposal, and also submitted comments ourselves that outlined numerous concerns including the cost on businesses and the nonprofit community and the negative impact on employees who would be forced to transition from earning a salary to less flexible hourly positions.  After the Independent Regulatory Review Commission reviewed these comments, it issued comments of its own that largely echoed the business community’s concerns and said that the state Dept. of Labor and Industry should work more closely with the legislature when undertaking such a significant and substantial rule change.  The department will likely still submit a final proposed rule, which IRRC could opt to reject if its questions are not sufficiently addressed or directives not sufficiently adopted.